Indian Payroll System - Payroll Basics & Compliance

1 2 3 4 5 Agenda Payroll Basics & Compliance Payroll Allowances & Perks INDIAN PAYROLL SYSTEM Flexi Benefit Plans & Compensation Structuring Attendance, Leave calculation, Salary Sheets & Pay Slip Generation Income Tax for Salaries

Introduction Goal & Rules for this session The goal of our session is to make every participant learn about Payroll & compensation structuring. For any questions kindly drop a message in message box, it will be taken Kindly put yourself on mute, unmute whenever asked For Quizzes 50 Rs award for each question answered, need to type in message box, the first answer received will be a winner. 10 questions will be asked during the session so kindly be attentive.Gold & Silver medal award will be given to the top two participants, they will get 40% & 30% discount in our course fee INDIAN PAYROLL SYSTEM

Industrial Practice for Payroll Structuring Having a solid salary structure is very important to retain your current employees, as well as make your recruiting, hiring and promoting efforts more focused and easier to execute. Flexi Pay Structure 1 Fixed Structure Consolidated pay INDIAN PAYROLL SYSTEM

Are you ready? Let's begin! INDIAN PAYROLL SYSTEM

Understanding C & B 1 Base (Fixed Salary) 1 Variables 1 Benefits ( Perks) 1 Extended Benefits INDIAN PAYROLL SYSTEM

Why there is a need to structure salary? Why we cannot pay lump sum? Understanding C & B INDIAN PAYROLL SYSTEM

First Component Basic Pay Basic salary is largest component of the CTC making up for 33-50% of the total CTC Code on Wages : 50% of Gross (Basic Pay) Fully Taxable If it’s too high, it will increase the tax liability of the employee since this component is fully taxable. It also affects the liability of the employer since higher contributions would be required for PF, ESIC etc. If it’s too low, then you may not be able to meet the minimum wage norms set by the respective state government. Since minimum wages are updated regularly, you would run the risk of falling below the recommended wage limit. INDIAN PAYROLL SYSTEM

Allowances Fully Taxable Partly Taxable Allowances Fully Tax Exempted INDIAN PAYROLL SYSTEM

Partly Taxable Allowance Webinar on INDIAN PAYROLL SYSTEM No Section Particular Benefit 1 10(13A House Rent Allowance (Sec. 10(13A) & Rule 2A) Least of the following is exempt: a) Actual HRA Received b) 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Madras) c) Rent paid minus 10% of salary * Salary= Basic + DA (if part of retirement benefit) + Turnover based Commission Note: i. Fully Taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent ii. It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than Rs. 1,00,000 [Circular No. 08 /2013 dated 10th October, 2013]. 2 10(14) Children Education Allowance Up to Rs. 100 per month per child up to a maximum of 2 children is exempt 3 10(14) Hostel Expenditure Allowance Up to Rs. 300 per month per child up to a maximum of 2 children is exempt

Category #1 RECEIVED OR SPENT (whichever is less) Category #2 RECEIVED or LIMIT (whichever is less) Category #3 HOUSE RENT ALLOWANCE (H.R.A.) Partially Taxable Webinar on INDIAN PAYROLL SYSTEM

Partly Taxable Allowance Webinar on INDIAN PAYROLL SYSTEM No Section Particular Benefit 4 10(14) Transport Allowance granted to an employee to meet expenditure for the purpose of commuting between place of residence and place of duty Rs. 3,200 per month granted to an employee, who is blind or deaf and dumb or orthopedically handicapped with disability of lower extremities 5 10(14) Transport Allowance to an employee working in any transport business to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided employee is not in receipt of daily allowance. Amount of exemption shall be lower of following: a) 70% of such allowance; or b) Rs. 10,000 per month 6 10(14) Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office Exempt to the extent of expenditure incurred 7 10(14) Any Allowance granted to meet the cost of travel on tour or on transfer Exempt to the extent of expenditure incurred 8 10(14) Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty Exempt to the extent of expenditure incurred 9 10(14) Helper/Assistant Allowance Exempt to the extent of expenditure incurred 10 10(14) Research Allowance granted for encouraging the academic research and other professional pursuits Exempt to the extent of expenditure incurred

Partly Taxable Allowance No Section Particular Benefit 11 10(14) reim of Uniform Allowance Exempt to the extent of expenditure incurred 12 10(14) Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations) Amount exempt from tax varies from Rs. 300 per month to Rs. 7,000 per month. 13 10(14) Border area allowances, Remote Locality allowance or Disturbed Area allowance or Difficult Area Allowance (Subject to certain conditions and locations) Amount exempt from tax varies from Rs. 200 per month to Rs. 1,300 per month 14 10(14) Tribal area allowance given in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Orissa Rs 200/month 15 10(14) Compensatory Field Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations) Rs 2600/month 16 10(14) Underground Allowance is granted to employees working in uncongenial, unnatural climate in underground mines Up to Rs. 800 per month 17 10(14) High Altitude Allowance is granted to armed forces operating in high altitude areas (Subject to certain conditions and locations) a) Up to Rs. 1,060 per month (for altitude of 9,000 to 15,000 feet) b) Up to Rs. 1,600 per month (for altitude above 15,000 feet)

Fully Exempt Allowance No Section Particular Benefit 1 10(7) Foreign allowances or perquisites paid or allowed by Government to its employees (an Indian citizen) posted outside India Fully Exempt 2 Allowances to Judges of High Court/Supreme Court (Subject to certain conditions) Fully exempt 3 10(14) Following allowances and perquisites given to serving Chairman / Member of UPSC is exempt from tax: a) Value of rent free official residence b) Value of conveyance facilities including transport allowance c) Sumptuary allowance d) Leave travel concession Fully Exempt 4 10(14) Allowances paid by the UNO to its employees Fully Exempt Webinar on INDIAN PAYROLL SYSTEM

Fully Taxable Allowance Dearness allowance Entertainment allowance Overtime allowance City compensatory allowance Interim allowance Project allowance Tiffin/meals allowance Cash allowance Non-practicing allowance Webinar on INDIAN PAYROLL SYSTEM

Entertainment allowances is first included in income under the head Salaries and deduction is given only to Government Employees :- Least of the following shall be exempt : Actual amount received 20% of Basic Salary – ₹ 5,000/- ENTERTAINMENT ALLOWANCE Webinar on INDIAN PAYROLL SYSTEM

GOVERNMENT EMPLOYEES : as per Government Rules (Licence Fees) Others – Value of RFA shall be :- basic+da+commission+fees+all tax allowances +any other monetary payment not being perquisites -employer contribution to pf - retirement benefits like gratuity 1. RENT FREE ACCOMMODATION Population Owned by Employer Not owned by Employer Up to 10 lakhs 7.5 % of the Salary* 15% of the Salary* OR 10 – 25 lakhs 10% of the Salary* Actual Rent (whichever is LESS) More than 25 lakhs 15% of the Salary* Webinar on INDIAN PAYROLL SYSTEM

c) ACCOMODATION IN HOTEL : 24% of Salary (OR) ACTUAL CHARGES {whichever is less} However nothing shall be taxable if the accommodation is provided for not more than 15 days + provided on transfer of employees from one place to other. For all Government and Non-Government employees. RENT FREE ACCOMMODATION. . Webinar on INDIAN PAYROLL SYSTEM

d) FURNISHED HOUSE :- If furniture is also provided by the employer to their employee, then value of such furniture shall be 10% p.a. of the cost or Actual hire charges Any maintenance charges or repaired of the building incurred by employee shall be ignored. RENT FREE ACCOMMODATION. . . . Webinar on INDIAN PAYROLL SYSTEM

e) TWO HOUSES ON TRANSFER :- In case of transfer from one place to another , and if employee is provided house at the new place and the employee also retains the old house, then value of such houses shall be taken on follows :- Up to 90 days of transfer : Value of one house whichever is lower shall be taxable. Post 90 days : Value of both the houses shall be taxable. RENT FREE ACCOMMODATION. . . . Webinar on INDIAN PAYROLL SYSTEM

Loan type = Any Rate = Rate charged by S.B.I. on 1 st day of relevant P/Y Interest shall be calculated on the outstanding balance for each loan as on the last day of each month. However nothing shall be taxable If Loan in aggregate do not exceed ₹ 20,000/- OR If the loan provided for the treatment of specified diseases. But if such loan has been reimbursed under any medical insurance scheme & the loan is not paid to the employer, it shall be taxable. Check only the last days balance & calculate interest thereon for the whole month. Transactions within the month shall be ignored & if no balance at the end of the month – No interest ☺ 2. VALUE OF INTEREST FREE LOAN Webinar on INDIAN PAYROLL SYSTEM

Value of the benefit shall be : – Actual Cost of the assets shall be reduced by the following percentage for each completed year; ignoring fractions from the date of purchase/put to use by the employer : Computer & Electronic Items Motor Car Any other assets 50% W.D.V. 20% W.D.V. 10% S.L.M. “Electronic items do not include household appliances” 4. TRANSFER OF MOVEABLE ASSETS Webinar on INDIAN PAYROLL SYSTEM

SWEEPER / GARDNER / WATCHMAN / PERSONAL ATTENDENT : Actual cost to the employer. GAS, ELECTRICITY, WATER : Own Source : Other Source : manufacturing cost per unit. amount paid to outside agency. 5. PERSONAL EXPENDITURE BENEFITS Webinar on INDIAN PAYROLL SYSTEM

C) CHILDREN EDUCATION : If the education facility is owned by employer. OR Free education is provided in any other educational institution by the reason of employee being in employment of that employer. FAIR MARKET VALUE OF SUCH SIMILAR EDUCATION. HOWEVER NOTHING SHALL BE TAXABLE IF VALUE PER CHILD DOES NOT EXCEED ₹1,000/- PER MONTH. Other Cases : Actual expenditure incurred by employer. 5. PERSONAL EXPENDITURE BENEFITS Webinar on INDIAN PAYROLL SYSTEM

6. LEAVE TRAVEL CONCESSION OTHER THAN BY AIR 1 st CLASS AC FARE 1 st Class Fare if Public transport exists. By AIR If the Journey is made National carrier Fare up to Economy Class

Exemption can be claimed for 2 journeys in a block of 4 years i.e. 2006-2009, 2010-2013. 2014-2014-2017, 2018-2021 Out of 2 journey, exemption of one journey can be claimed in the calendar year. Exemption can be claimed only for 2 children (who are born after year-1999) LTC given to foreign citizen is chargeable to tax. Can be carried forward to next block but consume 1st year L.T.C. . . . Webinar on INDIAN PAYROLL SYSTEM

WITHIN INDIA :- Expenditure incurred or reimbursed on any medical treatment provided to an employee or any member of his family is FULLY EXEMPT without any limit for treatment in any hospital, dispensary, etc., if Maintained by the Employee Maintained by Government Maintained by any local authority Approved by Govt. for treatment of Government or other employees Approved for a specified disease only for treatment of specified disease. 7. MEDICAL PERQUISITE Webinar on INDIAN PAYROLL SYSTEM

LAPTOP & COMPUTERS OTHER ASSETS : NIL VALUE : 10% p.a. of the Actual Cost OR Actual Hire Charges 3. USE OF MOVEABLE ASSETS Webinar on INDIAN PAYROLL SYSTEM

WITHIN INDIA :- Health Insurance Premium incurred or reimbursed for insurance on the health of employee or any member of his family is FULLY EXEMPT. REIMBURSEMENT BY EMPLOYER of any amount actually spent by the employee for obtaining his or his family member’s treatment in any hospital, nursing home or a clinic up to maximum ₹ 15,000/- for P/Y. 7. MEDICAL PERQUISITE . . . Webinar on INDIAN PAYROLL SYSTEM

OUTSIDE INDIA:- Such medical expenses shall be tax-free to the extent permitted by R.B.I. Expenses on stay abroad of the employee or any member of his family for medical treatment with one attendant who accompanies the patient in connection with such treatment to the extent permitted by R.B.I. TRAVEL EXPENSES of patient ( employee or his family member) and one attendant. . Who accompanies the patient in connection with such treatment shall be exempt, IF Gross Total Income (excluding such travel expenses but after including taxable medical expenses but after including taxable medical and boarding) doesn’t exceed ₹ 2,00,000/-. 7. MEDICAL PERQUISITE . . . Webinar on INDIAN PAYROLL SYSTEM

1. EXCLUSIVELY FOR OFFICIAL PURPOSE NIL 2. EXCLUSIVELY PERSONAL PURPOSE Actual Running & Maintenance + Actual Chauffeur Expenses + wear & tear @ 10% of Cost OR Actual HIRE CHARGES 8. When car is owned or hired by EMPLOYER and used for : Webinar on INDIAN PAYROLL SYSTEM

PARTLY OFFICIAL & PARTLY PERSONAL PURPOSE : – Running & Maintenance Expenditure is borne by EMPLOYER up to 1.6 Litres CC Exceeding 1.6 Litres CC ₹ 1,800 p.m. ₹ 2,400 p.m. – Running & Maintenance Expenditure is borne by EMPLOYEE up to 1.6 Litres CC Exceeding 1.6 Litres CC ₹ 600 pm ₹ 900 pm ₹ 900 pm (BOTH CASES) – Add : ₹ 900 per month of Chauffeur Webinar on INDIAN PAYROLL SYSTEM

NIL Exclusively for Official Purpose: Exclusively for Personal Purpose : Actual Expenditure incurred by employer Partly Official Partly Personal : Up to 1.6 Litres CC Exceeding 1.6 Litres CC ₹ 1,800 p.m. ₹ 2,400 p.m. WHEN CAR IS OWNED BY EMPLOYEE AND USED : Webinar on INDIAN PAYROLL SYSTEM

If the amount of Gift exceeds ₹ 5,000/- in aggregate during the previous year, then such excess amount shall be taxable. However if the gift is by way of Cash or by way of Cheque, then the entire amount shall be taxable 9. VALUATION OF PERQUISITE IN RESPECT OF GIFTS, VOUCHER OR TOKEN Webinar on INDIAN PAYROLL SYSTEM

STEP 1 : STEP 2 : Expenditure incurred by employer in respect of club expenditure. Less : Amount incurred for official purpose Less : Amount recovered from employee BALANCE IF POSITIVE WILL BE TAXABLE Note : Health Club, Sports facilities etc. provided uniformly to all classes of employees by the employer shall be EXEMPTED. Note : Initial deposit / Fees for Corporate or institutional membership, where benefit doesn’t remain with the particular employee after the cessation of employment are exempt. 1 10.VALUATION OF PERQUISITE : CLUB EXPENDITURE Webinar on INDIAN PAYROLL SYSTEM

11. SWEAT EQUITY SHARES Fair Market value of shares or securities on the date of exercise of option by the assessee less amount recovered from the employee in respect of such shares shall be the taxable value of perquisites. Fair Market Value shall be determined as follows: a) In case of listed Shares: Average of opening and closing price as on date of exercise of option (Subject to certain conditions and circumstances) b) In case of unlisted shares/ security other than equity shares: Value determined by a Merchant Banker as on date of exercise of option or an earlier date, not being a date which is more than 180 days earlier than the date of exercise of the option. Webinar on INDIAN PAYROLL SYSTEM

The amount of any contribution to an approved superannuation fund by the employer in respect of the assessee (employer), to the extent it exceeds ₹ 1,50,000/-. It is taxable in the year in which contribution is made. 12. EMPLOYER’s CONTRIBUTION TOWARDS APPROVED SUPERANNUATION FUND :- Webinar on INDIAN PAYROLL SYSTEM

RESIDUAL HEAD. . . WHICH COVERS THOSE BENEFITS, AMENITY, SERVICE, RIGHTS OR PRIVILEGE PROVIDED BY AN EMPLOYER WHICH IS NOT COVERED BEFORE ( IN 1 to 12 ). Mobile / Telephone as perquisite is not taxable anywhere in the Salary head or any other head. Any other benefit shall be valued @ Cost to employer. Calculation of Perks 14) etc. . . . . Webinar on INDIAN PAYROLL SYSTEM

Partly Taxable Allowance/Perks Salary Breakup TAX Remark Basic No Tax Exemption D.A. HRA Actual HRA or (Rent paid - 10% of salary) or 40% of Basic Non metro, 50% Metro Meal Voucher Max 2500 ( 50 rs per meal, 35 rs snack) (135 per day max) Telephone & Internet Reimbursement Actual/Electronic invoices Child Education Allowance Max upto 200 ( 2 kids) Hostel fees Max upto 600 ( 2 kids) Petrol reimbursement 2400 if vehicle is above 1600cc Driver Allowance Max 900 Superannuation fund 15% of basic +DA max 1.5 lakh NPS Employer contribution 10% of basic + DA max under 80ccd(2) Purchase of Laptop/Computer/Mobile No limit Performance Development Allowance No limit Books and Periodicals No limit - against bills LTA As per LTA norms Webinar on INDIAN PAYROLL SYSTEM

Name any 5 Partly Taxable Allowances Understanding C &B Webinar on INDIAN PAYROLL SYSTEM

Understanding Salary Terms Gross Pay CTC Net Pay (In Hand) Webinar on INDIAN PAYROLL SYSTEM

Understanding CTC, Net Pay, and Gross in Detail CTC Total Cost Of Company On Employee CTC= Direct Benefits+Indirect Benefits+Savings/Pension Contributions Gross Salary Gross salary is the amount calculated by adding up one's basic salary and allowances, before deduction of taxes and other deductions. It includes bonuses, over-time pay, holiday pay, and other differentials. There are few components that do not form a part of gross salary Refreshments and snacks provided by the employer to his employees during the office hours. Reimbursement for travel and food expenses for official/business purposes Net Salary Net Salary is the amount that an employee takes home. Net Salary = Gross salary - All deductions like Income Tax, Pension, Professional Tax etc. It is also known as Take Home Salary Webinar on INDIAN PAYROLL SYSTEM

Who are tax exempt from allowances? Understanding C &B 3 Webinar on INDIAN PAYROLL SYSTEM

Statutory Compliance Webinar on INDIAN PAYROLL SYSTEM

Provident Fund Provident fund is an investment both by the employer and the employee each month, the lump sum amount of which acts as an employee's retirement benefits scheme.It is necessary that employees' drawing less than Rs 15,000 per month, to become members of the EPF . As per the guidelines in EPF , employee, whose 'basic pay' is more than Rs. 15,000 per month, at the time of joining, is not required to make PF contributions but they can’t opt out of it if they are part of it while being employed. The maximum wage ceiling of Rs.15,000 is not applicable for international workers . PF is applicable on Basic salary plus all allowances except HRA .The employers monthly contribution is restricted to a maximum amount of Rs 1,800. Even if the employee’s salary exceeds Rs 15,000, the employer is liable to contribute only Rs 1,800 (12% of Rs 15,000).Employees can contribute more than 12% of their salary voluntarily, however the employer is not bound to match the extra contribution of the employee. Employees will pay 10% of their basic salary towards EPF if Company has less than 20 employees or a sick Industrial unit or is in losses or (Gum,Coir,beedi and jute industry) Webinar on INDIAN PAYROLL SYSTEM

Define Gross Salary Understanding C &B 4 Webinar on INDIAN PAYROLL SYSTEM

Provident Fund Contribution Towards Employee Contribution (%) Employer contribution (%) EPF 12/10 Difference Between Pension Contribution and EE Share (3.67%)12%*8.33 EPS (Pension Scheme) 8.33 EDLI 0.5 Admin Charges 0.50% Admin Charges(Min Rs 500) Note : Minimum contribution Rs. 500 or Rs. 75 for non-contribution of PF admin charges. Webinar on INDIAN PAYROLL SYSTEM

Definition of ‘Wages’ All remuneration whether by way of salaries, allowances or otherwise , expressed in terms of money or capable of being so expressed which would if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes,— basic pay ; dearness allowance ; and retaining allowance , if any. Exclusions : Statutory bonus Value of house accommodation/supply of water, light, medical attendance or other amenity Provident fund, pension and interest accrued thereon Conveyance allowance/ value of travelling concession Sum paid to defray special expenses House Rent Allowance Remuneration payable under award or settlement Overtime Allowance Commission Gratuity Retrenchment Compensation Other Retiral Benefits/Ex-gratia

Definition of wage Meaning and inclusions Means all remuneration whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, in terms of employment, express or implied, where fulfilled, be payable to a person employed in respect of his employment, and includes – Basic pay; Dearness allowance; and Retaining allowance, if any. Specified exclusions Statutory bonus payable but not forming part of remuneration; Value of house accommodation and utilities (such as light, water, medical attendance, etc.); Employer contribution to provident fund / pension together with accretions; Conveyance allowance or value of travelling concession; Sum paid to defray special expenses due to nature of work; House rent allowance; Remuneration payable under any award settlement; Any overtime allowance; Any commission payable; Any gratuity payable on termination; Any retrenchment comp/ benefit payable or ex gratia payment made Conditional inclusions Value of remuneration in kind Where an employee is given remuneration in kind in lieu of either the whole or part of the wages payable to him value of such remuneration as does not exceed 15% of total wages payable to him Shall be deemed to form part of wages of such employee. Where the aggregate of specified exclusions as highlighted: exceeds one-half or such other notified percentage of all remuneration calculated under this clause, amount which exceeds such one-half or other percent, so notified shall be deemed as remuneration and shall accordingly be added under this clause Conveyance/value of travel concession, house rent allowance, remuneration payable under award or settlement and overtime allowance shall be taken for computation of wage – for the purpose of equal wages to all genders © 2019 Deloitte Touche Tohmatsu India LLP ‹#› Exclusions – other than highlighted components - capped at 50% of total remuneration • Remuneration in kind to be upto 15% of total remuneration

At Least 50% of total remuneration to constitute ‘wages’! If the exclusions under the definition of ‘wages’ exceed one half or such other per cent. as may be notified by the Central Government of the entire remuneration, the amount which exceeds such one half or such other per cent. shall be treated as ‘wages.’ Case Study I Wages under the Code = Rs.5000 CTC Break Up Amount Basic Rs 5000 HRA Rs 3000 Conveyance Rs 2000 Total Rs 10,000

ESIC Employees whose monthly wages are Rs 21,000 or below are covered under the ESI Act. The wage limit for coverage under the Act had been increased from Rs 15,000 per month to Rs 21,000 in December 2016. An employer is liable to pay its own contribution for every employee and deduct the employee’s contribution from wages bill and pay these contributions to the ESI within 15 days of the last day of the calendar month in which the contributions are due. Particulars Current Rate Reduced Rate (w.e.f 1/7/2019) Employer Share 4.75% 3.25% Employee Share 1.75% 0.75% Total 6.50% 4.00% Webinar on INDIAN PAYROLL SYSTEM

Gratuity 15 days salary is given for every completed year. Since the number of days in the month is considered only 26, you will get 15/26 of your one-month salary for every completed year. The salary includes basic pay, dearness allowances, and commission. The last drawn salary is considered for gratuity calculation. If the employee is a daily wage earner, the average of last 3-month wage is considered a one-day salary Gratuity Amount = last drawn monthly Salary x Tenure of service in years x 15/26 For every year, you will get 57.69% of the monthly salary as the gratuity. Note, the monthly salary would be last drawn salary and it includes only Basic+DA+commission (4.81%) monthly Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years. Webinar on INDIAN PAYROLL SYSTEM

What are the PF admin charges in case of non contribution? Understanding C &B 5 Webinar on INDIAN PAYROLL SYSTEM

Statutory Bonus & LWF Statutory Bonus Statutory Bonus is an additional payment to employees with the intention of motivating them under Payment of Bonus Act 1965. Bonus is 8.33% of Basic+DA (max 20%) and it can be paid either monthly or annually. Organisation with More than 20 workforce is eligible for this. Statutory bonus may not be included in the CTC, as it is on the Profit earned by the Establishment during the Financial Year and available surplus to compute the percentage to be disbursed. Variable bonus can be included as one of the Head in the CTC to form part of a compensation. Webinar on INDIAN PAYROLL SYSTEM

Employee Deductions 1 EE EPF (12% of wages except HRA), cap 1800 PT LWF ESIC Webinar on INDIAN PAYROLL SYSTEM

PT PT is a state tax imposed by the State Govt, on account of the infrastructure it provides to you. More likely a Toll bridge, if you are using the state facility, pay the token amount. PT is compulsory and is exempted from Income TAx.As per the Karnataka Professional Tax Slab Rates, all individuals with a monthly gross income less than Rs.15,000 are exempted from any charges. However, employees with a monthly gross salary above Rs.15,000 are levied a professional tax of Rs.200.A maximum amount of Rs.2400 is payable as professional tax in Karnataka Monthly Gross Salary Amount Payable Less than 15,000 -NIL More than 15,000 -Rs. 200/month Professional tax is not applicable in the following states and union territories Arunachal Pradesh, Andaman & Nicobar, Chandigarh, Dadra & Nagar Haveli, Daman & Diu, Delhi, Goa, Haryana, Himachal Pradesh, Jammu & Kashmir, Lakshadweep, Nagaland, Punjab, Rajasthan, Uttarakhand, and Uttar Pradesh . Webinar on INDIAN PAYROLL SYSTEM

What is the employer Contribution in ESIC? Understanding C &B 6 Webinar on INDIAN PAYROLL SYSTEM

Flexi Pay Webinar on INDIAN PAYROLL SYSTEM

Make the CTC for 9 lac Understanding C &B 7 Webinar on INDIAN PAYROLL SYSTEM

Income Tax on Salaries Every Payment made by an employer to his employees for service rendered by him would be chargeable to tax as income from salaries. Provisions regarding income under head of salaries given under section 15, 16 and 17. SALARY includes….Sec. 17(1) Wages; Annuity or pension; Gratuity; Fees, Commission, perquisites or profits in lieu of salary; Any advance salary; Leave salary; Annual accretion; and Transferred balance Webinar on INDIAN PAYROLL SYSTEM

Income Tax on Salaries Thus the amount of taxable income is to arrived as follows. a)Total salary income -- ________ b)less total of exempted items ( such as HRA exemption) -- ________(-) c ) Gross Taxable income -- _______ d) less savings(limited to maximum) _________(-) e) Net taxable salary ---------- __________ Webinar on INDIAN PAYROLL SYSTEM

Category #1 RECEIVED OR SPENT (whichever is less) Category #2 RECEIVED or LIMIT (whichever is less) Category #3 HOUSE RENT ALLOWANCE (H.R.A.) Webinar on INDIAN PAYROLL SYSTEM

Partly Taxable Allowance Webinar on INDIAN PAYROLL SYSTEM No Section Particular Benefit 1 10(13A House Rent Allowance (Sec. 10(13A) & Rule 2A) Least of the following is exempt: a) Actual HRA Received b) 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Madras) c) Rent paid minus 10% of salary * Salary= Basic + DA (if part of retirement benefit) + Turnover based Commission Note: i. Fully Taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent ii. It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than Rs. 1,00,000 [Circular No. 08 /2013 dated 10th October, 2013]. 2 10(14) Children Education Allowance Up to Rs. 100 per month per child up to a maximum of 2 children is exempt 3 10(14) Hostel Expenditure Allowance Up to Rs. 300 per month per child up to a maximum of 2 children is exempt

Partly Taxable Allowance Webinar on INDIAN PAYROLL SYSTEM No Section Particular Benefit 4 10(14) Transport Allowance granted to an employee to meet expenditure for the purpose of commuting between place of residence and place of duty Rs. 3,200 per month granted to an employee, who is blind or deaf and dumb or orthopedically handicapped with disability of lower extremities 5 10(14) Transport Allowance to an employee working in any transport business to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided employee is not in receipt of daily allowance. Amount of exemption shall be lower of following: a) 70% of such allowance; or b) Rs. 10,000 per month 6 10(14) Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office Exempt to the extent of expenditure incurred 7 10(14) Any Allowance granted to meet the cost of travel on tour or on transfer Exempt to the extent of expenditure incurred 8 10(14) Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty Exempt to the extent of expenditure incurred 9 10(14) Helper/Assistant Allowance Exempt to the extent of expenditure incurred 10 10(14) Research Allowance granted for encouraging the academic research and other professional pursuits Exempt to the extent of expenditure incurred

Partly Taxable Allowance No Section Particular Benefit 11 10(14) Uniform Allowance Exempt to the extent of expenditure incurred 12 10(14) Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations) Amount exempt from tax varies from Rs. 300 per month to Rs. 7,000 per month. 13 10(14) Border area allowances, Remote Locality allowance or Disturbed Area allowance or Difficult Area Allowance (Subject to certain conditions and locations) Amount exempt from tax varies from Rs. 200 per month to Rs. 1,300 per month 14 10(14) Tribal area allowance given in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Orissa Rs 200/month 15 10(14) Compensatory Field Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations) Rs 2600/month 16 10(14) Underground Allowance is granted to employees working in uncongenial, unnatural climate in underground mines Up to Rs. 800 per month 17 10(14) High Altitude Allowance is granted to armed forces operating in high altitude areas (Subject to certain conditions and locations) a) Up to Rs. 1,060 per month (for altitude of 9,000 to 15,000 feet) b) Up to Rs. 1,600 per month (for altitude above 15,000 feet)

Name four allowances/components which are exclusion from wages in Code on wages 2020 Understanding C &B Webinar on Indian Payroll System 8

Income Ta x r

Income Tax Webinar on Compensation & Benefits

Income Tax

What is Tax Slab rate for income of 15 lac in new tax regime? Understanding C &B 9 Webinar on INDIAN PAYROLL SYSTEM

IT Investment proof Submission Process In India, employees must submit an investment declaration before the beginning of the tax year in April. An investment declaration is a document in which employees provide their investment plans that they then will provide proofs for at year end. Taxes will be calculated and deducted from April- December. In January, emp An investment proof submission will then be required, this is based off the investment declaration given by employees. Employees are asked to produce proofs against the investment declaration given in April and consider the same when calculating their taxes. Based then on the investment proof submissions provided, taxes will be re- calculated and deducted accordingly in the remaining three months of the financial year ( January- March) Investment Declaration form Webinar on INDIAN PAYROLL SYSTEM

IT Investment proof Submission Process list of documents needs to preserved for claiming deductions: List of investments u/s 80C - Life Insurance Premium receipts Deferred Annuity receipts N.S.C. Accrued Interest receipts Provident Fund contribution receipts Receipt of Term Deposit for 5 year or more with scheduled bank Receipt of Public Provident Fund contribution Receipt of Senior citizen saving scheme deposit Receipt of Contribution made to superannuation fund Receipt of Tuition fees Receipt of Investment in Debentures / Shares of Companies as approved by CBDT Receipt of Time Deposit for 5 year with Post Office Receipt of Subscription towards Mutual Fund units Receipt of Principal Repayment of housing Loan/Stamp duty,registration fees & other exps.for purchase of such house property Receipt of Subscription to notified deposit scheme Receipt of Subscription to notified deposit scheme of National Housing Bank Receipt of Contribution made to Unit Linked Insurance Plan Others relevant receipts Webinar on INDIAN PAYROLL SYSTEM

IT Investment proof Submission Process List of investments u/s 80CCC - Receipts of Contribution to Pension Funds List of investments u/s 80CCD - Receipts of Contribution to Retirement Benefit Pension Scheme- 80CCD1 (by employee) Receipts of Contribution to Retirement Benefit Pension Scheme- 80CCD1B (by employee) Receipts of Contribution to Retirement Benefit Pension Scheme- 80CCD2 (by employer) List of investments u/s 80CCG - Receipts of Investment in shares under Rajiv Gandhi Equity Scheme List of investments u/s 80EE - Documents supporting Interest on Housing loan for first home Webinar on INDIAN PAYROLL SYSTEM

Form 12 B Individuals who join a new company or a new organisation in the middle of the year are required to submit Form 12b under Rule 26A. The form basically discloses the information regarding the individual’s previous income.The main purpose of the form is to furnish details of the income earned by the individual from the previous employer. Every new employee has to submit Form 12b to their new employer. Furnishing Form 12b is not compulsory. What constitutes form 12 B The employee has to fill in some details in Form 12b before submitting it to the new employer. It is very important that the individual fill in the correct details in the form. Webinar on INDIAN PAYROLL SYSTEM

Form 12 B Listed below are the details that one has to provide in Form 12b before submitting it to the employer. Certain details of the previous employer such as PAN number, TAN number, etc Break-up of the total salary such as Basic Salary+ DA, House Rent Allowance , Prerequisite, Leave encashment , Leave Travel Allowance and other such parts of the salary Deduction in respect to Provident fund Deduction in regard to rent free accommodation Any deductions under various sections of Income Tax Act including Section 80C, Section 80G , Section 80D , Section 80E , Section 24 Tax Deducted at Source on Salary deducted by the previous employer Professional tax paid by the employee(if any What happens after the Employee submits the Form 12b? Once the employee submits Form 12b with the correct details required, the new employer will furnish a Consolidated Form 16 at the end of the year based on the details provided by the new employee in Form 12b. Webinar on INDIAN PAYROLL SYSTEM

Understanding Salary Benchmarking Salary benchmarking, also called compensation benchmarking, is a process by which compensation professionals match internal jobs and their descriptions to similar jobs and descriptions in a salary survey or other source of market pay data, in order to identify the market pay rate for each position. Payscale as a tool for Salary Benchmarking https://6figr.com/in/salary/google https://payreview.work/dashboard Webinar on INDIAN PAYROLL SYSTEM

Regression analysis To understand,how tenure, education and job grade influence pay perform a regression analysis, which allows to “predict” the strength of the relationship between the variables : tenure and pay, then job grade and pay, and education and pay. Regression analysis Sheet The R-square value explains the strength of this relationship. The closer it is to 1 (or 100%), the more it explains the result. But in reality you never get 1. So for example, the R-square value between job grade and pay is 52%. It means that job grade “explains” 52% of an employee’s pay. We can do multi as well for various parametres Webinar on INDIAN PAYROLL SYSTEM

Preparing Salary Sheet & Pay slips Webinar on INDIAN PAYROLL SYSTEM

Name two perquisites with their tax liability 10 Webinar on INDIAN PAYROLL SYSTEM

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