SAP Help Portal Legacy Mapping Global SearchSAP Business SuiteSAP for IndustriesSAP Business OneSAP NetWeaverAnalyticsSAP In-Memory ComputingApplication Lifecycle MgmtSAP Best PracticesCloudMobileDatabaseAdditional InformationHome PageSAP Business SuiteSAP ERPSAP ERP 6.0Payroll India (PY-IN)Payroll India (PY-IN)Payroll in the SAP SystemOff-Cycle Activities (PY-XX-OC)Infotypes for Personnel Administration and PayrollPay Scale Grouping for AllowancesIndirect Evaluation (INVAL) and 40ECS FeatureMid Year Go LiveRehiringGross Part of PayrollNet Part of PayrollIncome TaxIncome Tax CalculationSection 80 DeductionSection 89(1) ReliefThird Party DeductionsIncome from Other SourcesExemptionsExemptions and Perquisites on HousingExemption and Perquisite Calculation for Car and ConveyancePrevious Employment Tax DetailsTax on ArrearsProfessional TaxProvident FundEmployee State InsuranceLabour Welfare FundRecovery of Rounded Off AmountsMinimum Net PayDeductionsSubsequent ActivitiesReportsReportingInterface Toolbox for Human Resources (PX-XX-TL)Employee Self-Service IndiaEmployee Self-Services (ESS)Public SectorFeedback Download Print Fullscreen Income Tax PurposeThis component computes tax on the income received by an employee for a financial year.

Income of an employee may consist of all or any of the following components:· Regular Income - This is that part of the salary, which an employee receives every month and is projected for the entire financial year. For example, Basic Pay, House Rent Allowance, Conveyance Allowance.¡ Monthly regular income - Mon Reg Income wage type (/124). This wage type is the cumulation of the values of all the wage types for which you have configured the Cumulation Class as 24.¡ Annual regular income - Ann Reg Income wage type (/410)The value of Ann Reg Income wage type (/410) is the sum of: i. Value of Mon Reg Income wage type (/124) in the Cumulative Results Table ii. Value of Mon Reg Income wage type (/124) for the current period iii. Value of Mon Reg Income wage type (/124) for the current period, multiplied by the value of Projection Factor wage type (/401)Note· Value of the Projection Factor wage type (/401) is the number of remaining periods that payroll has to be run in the current financial year, for the employee.· The projection of the remaining periods can be until the end of the financial year or until the employee is terminated or the retirement date of the employee, whichever is the earliest.· System projects the annual regular income using either Actual Basis or Nominal Basis. The system by default uses Actual Basis to project annual regular income. You can access this from the IMG for Payroll India: Tax ? Maintain Annual Taxable Income.We recommend that you use a single tax calculation method, either Actual Basis or Nominal Basis throughout the financial year, to project the annual regular income.· Irregular Income - This is that part of the salary, which an employee receives for a particular period and is not projected for the entire financial year. For example, Leave Travel Allowance, Bonus.¡ Monthly irregular income - Mon Irr Income wage type (/125). This wage type is the cumulation of the values of all the wage types for which you have configured the Cumulation Class as 25.¡ Annual irregular income - Ann Irr Income wage type (/411)The value of Ann Irr Income wage type (/411) is the sum of: i. Value of Mon Irr Income wage type (/125) in the Cumulative Results Table ii. Value of Mon Irr Income wage type (/125) for the current period· Perquisite - Example, Housing Perk, Loan Interest Advantage.¡ Annual Perk wage type (/127)¡ Annual Perk wage type (/413)The value of Annual Perk wage type (/413) is equal to the value of Annual Perk wage type (/127).· Previous Employment Salary¡ Prev Gross salary wage type (/4V1)¡ Val of perk u/s 17(2) wage type (/4VJ)¡ Profts wrt sal u/s 17(3) wage type (/4VK)These values are captured directly through the Previous Employment Tax Details infotype (0580). In case you have configured Multiple Form 16, these values are automatically captured in the system when an employee gets transferred from one group of the company to another group in a financial year.· Income from Other Sources¡ Any other Income wage type (/131)This includes the income captured through Income From Other Sources infotype (0584) Other Sources subtype (0002), and the profit and loss from House Property.Implementation ConsiderationsSAP provides you with the following configurations:· The slab codes are defined in the table view Slab Codes for Taxation (V_T7INT1) for a financial year/years.· The different taxation slabs for the tax codes are defined in the table view Taxation Slabs (V_T7INT3).These are legal settings and you cannot modify them.

IntegrationIndia Income Tax computations payroll function (INTAX) computes the tax on the income received by an employee for a financial year.FeaturesThe system calculates the income tax for an employee after taking into consideration the following:· Exemption¡ Medical Exemption - Exm.under pro.to sec17(2) wage type (/414)¡ Section 10 Exemptions - Exemption U/S 10 wage type (/130)The value of Exemption U/S 10 wage type (/130) is the sum of the values of:§ CEA Annual Exemption wage type (/4E1) - Exemption on Child Education Allowance§ CHA Annual Exemption wage type (/4E2) - Exemption on Child Hostel Allowance§ Conveyance Annual Exempt wage type (/4E3) - Conveyance Exemption§ HRA Annual Exemption wage type (/4E4) - Exemption on House Rent Allowance§ LTA Annual Exemption wage type (/4E5) - Exemption on Leave Travel Allowance§ Prev exemp u/s10 wage type (/4V2) - Previous Employment Exemptions§ Voluntary Ret. Exemption wage type (/4E6) - Exemption on Voluntary Retirement§ Leave Salary Exemption wage type (/4E7) - Leave Exemption Allowance§ Gratuity Cont. Exemption wage type (/4E8) - Gratuity ExemptionNoteIn addition to these wage types, you can define your own annual exemptions for allowances and reimbursements using the General Payroll function for Allowance/Reimbursement Treatment (INCTX).· Deduction¡ Aggregate Deduction - Aggrg Deduction wage type (/424)The value of Aggrg Deduction wage type (/424) is the equal to the value of Empmnt tax (Prof Tax) wage type (/422) - Professional Tax.NoteEmpmnt tax (Prof Tax) wage type (/422) includes the value of Prev prof. tax paid wage type (/4V3).¡ Chapter VI Section 80 Deductions - Agg of Chapter VI wage type (/432)· ReliefSection 89(1) Relief - Sec 89 relief wage type (/451) The system also takes into consideration the following components of tax while processing income tax for an employee:· Surcharge on Income TaxSurcharge of 10% is applicable on Tax payable wage type (/446) if the value of the Total Income wage type (/434) is greater than INR 10,00,000.The total income tax (including surcharge), that is, the value of Tax payable and surcharge wage type (/450) cannot exceed the sum of:¡ Income tax on INR 10,00,000¡ Amount of income that exceeds INR 10,00,000, which is the difference between the value of Total Income wage type (/434) and INR 10,00,000.Example· Education CessAll employees have to pay an education cess of 2%. Education cess is calculated as 2% of the sum of tax payable and surcharge. The India Income Tax computations payroll function (INTAX) calculates and stores the amount of education cess in the Education Cess wage type (/449).The value of /449 = 2% (/446 + /448).· Secondary and Higher Education CessAll employees have to pay a secondary and higher education cess of 1%. The india Income Tax computations payroll function (INTAX) calculates and stores the amount of secondary and higher education cess in Sec and Higher Educ Cess wage type (/447).The value of /447 = 1% (/446 + /448).· Voluntary TaxAn employee can choose to pay certain amount of tax, which is not based on any other component. The Voluntary tax deduction rule (INVT) calculates this Voluntar

y Tax. The system provides you with three options for voluntary tax deduction:¡ Deduction of an additional tax amount in a period without changing the annual tax deduction amount. The value of Income Tax wage type (/460), calculated for the period by India Income Tax computations payroll function (INTAX), is increased by this additional amount. This additional tax that is deducted in a particular period is adjusted in the following payroll periods. You have been provided with the model wage type Voluntary Tax (MVT0) for this purpose. HR-IN: Voluntary tax deduction rule (INVT) reads the value of Voluntary Tax wage type (MVT0) and uses the applicable tax rates of surcharge and education cess to divide this amount into the following tax components:¦ Tax payableThe tax payable value is added to the value of Monthly Tax Payable wage type (/4MT).¦ Education cessThe education cess value is added to the value of Monthly Education Cess wage type (/4ME).¦ SurchargeThe surcharge value is added to the value of Monthly Surcharge wage type (/4MS).¡ Deduction of a fixed tax amount in a period without changing the annual tax deduction amount. The value of Income Tax wage type (/460), calculated for the period by India Income Tax computations payroll function (INTAX), is replaced by this fixed amount. Tax deduction in the following periods is adjusted accordingly. You have been provided with the model wage type Voluntary Tax (MVT1) for this purpose. HR-IN: Voluntary tax deduction rule (INVT) reads the value of Voluntary Tax wage type (MVT1) and uses e applicable tax rates of surcharge and education cess to divide this amount into the following tax components:¦ Tax payableThe tax payable value replaces the value of Monthly Tax Payable wage type (/4MT).¦ Education cessThe education cess value replaces the value of Monthly Education Cess wage type (/4ME).¦ SurchargeThe surcharge value replaces the value of Monthly Surcharge wage type (/4MS).¡ Deduction of a fixed amount of voluntary tax over the annual tax liability. The Voluntary tax deduction rule (INVT) generates the Additional Voluntary Tax wage type (/462) for this fixed amount. The value of Income Tax wage type (/460), calculated for the period by India Income Tax computations payroll function (INTAX), is increased by the value of Additional Voluntary Tax wage type (/462). This additional tax that is deducted is not adjusted in the following periods of the financial year. The total tax deducted in the year is increased by this fixed amount of voluntary tax. You have been provided with the model wage type Voluntary Tax (MVT2) for this purpose. The rule reads the value of Add. Voluntary Tax wage type (MVT2) and generates Additional Voluntary Tax wage type (/462). HR-IN: Voluntary tax deduction rule (INVT) then uses the applicable tax rates of education cess and surcharge to divide the value of Additional Voluntary Tax wage type (/462) into the following wage types:¦ Voluntary Tax Payable wage type (/4LT)¦ Voluntary Education Cess wage type (/4LE)¦ Voluntary Surcharge wage type (/4LS)· Tax on Arrears· Tax on BonusThe system allows you to generate the following tax reports:· Form 16· Form 24See also:Previous Employment Tax Details FeedbackWas this page helpful to you?

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