Payroll - Income Tax

[Former Member]

Dear Experts @ SCN,

Am a time consultant but recently have started working on payroll too. I work for Indian payroll.

The purpose of posting this thread is to know the income tax/TDS configuration and understanding it in SAP.

Therefore, I request you all to provide me the details on knowing the configuration of income tax/TDS in Indian payroll.

accepting some good replies to this thread.

Cheers!!!
Tahir

[sikindar_a · Accepted solution]

My first advice would be to check in Google , next search in the forum you will find lot of threads

iif they are not useful to you i will provide you the information on the same

[Former Member · Accepted solution]

Hello Sikindar,

Thanks for reply . I tried reading a few threads in SCN. Most of the threads wont start from the scratch and most importantly, only reading wont be interactive.

Requesting you to help me out in understanding it from the scratch and more clearly.

Thanks

Tahir

[sikindar_a · Accepted solution]

Then fine i will do the need ful

[Former Member · Accepted solution]

will wait for your lengthy and explanatory reply @Sikindar.

Thanks Advance

Tahir

[venkateshorusu · Accepted solution]

Go through below information.

Annual taxable income consists of:

• Regular Income

This is part of salary employee receives every month at current place of employment and is projected for either till the end of the current financial year or till the date of cessation of employment, whichever is earlier. For example, Basic Pay, Conveyance Allowance.

• Irregular Income

This is part of salary employee receives for a particular period and it is not projected for the entire year. For example, Bonus, Leave Travel Allowance.

• Perquisites

This is value of the perquisites given to an employee. For example, the perk value associated with the car given to the employee by the employer.

• Salary at previous place of employment received in the current financial year
• Income from other sources

Different tax rates are specified by the Government for this income. For Example, Business Profits, Lottery.

Tax is computed for every month of the year.

Tax rates are applicable on annual taxable income.

&procedure&

This payroll function processes tax on the income earned by the employee.

1. 1. Gross Salary wage type (/416) = Ann Reg Income wage type (/410) + Ann Irr Income wage type (/411) + Annual Perk wage type (/413) + 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) - Exm.under pro.to sec17(2) wage type (/414).
2. 2. Balance wage type (/418) = Gross Salary wage type (/416) - Exemption U/S 10 wage type (/130).
3. 3. Aggregate of deductions wage type (/424) = Empmnt tax (Prof Tax) wage type (/422).
4. 4. Incm under Hd Salary wage type (/426) = Balance wage type (/418) - Aggrg Deduction wage type (/424).
5. 5. Gross Tot Income wage type (/430) = Incm under Hd Salary wage type (/426) + Any other Income wage type (/131).
6. 6. Total Income wage type (/434) = Gross Tot Income wage type (/430) - Agg of Chapter VI wage type (/432).

Total Income wage type (/434) is rounded off to the nearest multiple of Rs.10.

1. 1. Tax on total Income wage type (/436) = Tax calculated on Total Income wage type (/434).

Total Income wage type (/434) comprises of the following components, which are taxed at different tax rates:

1. a) Long Term Capital Gains (Normal Rate) = Lng trm cap gns normal wage type (/3O3). This is taxed at the rate stored in the Long capital gain normal rate constant (LCNRT) of table view Payroll Constants (V_T511K).
2. b) Long Term Capital Gains (Special Rate) = Lng trm cap gns special wage type (/3OD). This is taxed at the rate stored in the Long capital gain special rate constant (LCSRT) of table view Payroll Constants (V_T511K).
3. c) Short Term Capital Gains (Listed Securities) = Short Gains on Listed Sec wage type (/3OS). This is taxed at the rate stored in the ST Cap. Gain rate (Listed Sec) constant (SCGRT) of table view Payroll Constants (V_T511K).

Note: In case the annual income of an employee falls in the non-taxable income slab, and the employee has any of the above capital gains income, the taxable amount of the capital gains is reduced by the amount of non-taxable income slab upper limit. Normal income and remaining amount of the capital gains is taxed. If there is more than one capital gains income, then the one with the highest tax rate is given priority for this benefit.

1. a) Other Income = Income from other sources wage type (/3O7). This is taxed at the rate stored in the Other Income - rate constant (OTHRT) of table view Payroll Constants (V_T511K).
2. b) Normal Income = Total Income wage type (/434) - (Lng trm cap gns normal wage type (/3O3) + Lng trm cap gns special  wage type (/3OD) + Income from other sources wage type (/3O7)). This is taxed at the rate configured in table view Taxation Slabs (V_T7INT3).
3. 1. Tax payable wage type (/446) = Tax on total Income wage type (/436) - Agg of Chapter VIII wage type (/444).
4. 2. Surcharge payable wage type (/448) = Surcharge calculated on Tax payable wage type (/446).
5. 3. Education Cess wage type (/449) = 2% (Tax payable wage type (/446) + Surcharge payable wage type (/448)).
6. 4. Sec and Higher Educ Cess wage type (/447) = 1% (Tax payable wage type (/446) + Surcharge payable wage type (/448)).
7. 5. Tax payable and surcharge wage type (/450) = Tax payable wage type (/446) + Secondary and Higher Educational Cess wage type (/447)+ Surcharge payable wage type (/448) + Education Cess wage type (/449).

Tax payable and surcharge wage type (/450) is rounded off to the nearest rupee.

1. 1. Tax deducted so far wage type (/456) = Prev Tax Deducted wage type (/4V5) + TDS other than salaries wage type (/4OC) + Income Tax wage type (/460) in the Cumulative Results Table.
2. 2. Net tax payable wage type (/458) = Tax payable and surcharge wage type (/450) - Sec 89 relief wage type (/451) - Tax deducted so far wage type (/456).
3. 3. Income Tax wage type (/460) = Net tax payable wage type (/458) divided by (Projection Factor wage type (/401) +1).

Rounding off monthly tax amounts rule (INTR) does the rounding off of the Income Tax wage type (/460) to the nearest rupee in all payroll periods, except for the last payroll period.

This payroll function calculates the monthly values for the following components:

• Tax payable
• Education cess
• Surcharge
• Monthly taxable income

<DS:RE.HINCF240>Print Program for Form 24 report (HINCF240) reads these monthly values and reports them on Form 24Q e-file.

The monthly values are calculated as follows:

• Monthly Tax Payable wage type (/4MT)

1. a) Tax Payable Ded Till Date wage type (/4TT) = Prev Emp Tax Payable wage type (/4PT) + value of Monthly Tax Payable wage type (/4MT) deducted till date.
2. b) Monthly Tax Payable wage type (/4MT) = (Tax Payable wage type (/446) - Tax Payable Ded Till Date wage type (/4TT) - tax payable part of Section 89 relief wage type (/451)) / Projection Factor.

• Monthly Education Cess wage type (/4ME)

a)             Edu Cess Ded Till Date wage type (/4TE) = Prev Employment Edu Cess wage type (/4PE) + value of Monthly Education Cess wage type (/4ME) deducted till date.

b)             Monthly Education Cess wage type (/4ME) = (Education Cess wage type (/449) - Edu Cess Ded Till Date wage type (/4TE) - Tax payable part of Section 89 relief wage type (/451)) / Projection Factor.

o                Monthly  Higher Edu Cess wage type (/4MH)

The value of this wage type is derived from the Monthly Education Cess wage type(/4ME). This wage type is derived only if the Secondary and Higher Education Cess wage type (/447) exists.

o                Monthly Surcharge wage type (/4MS)

a)             Surcharge Ded Till Date wage type (/4TS) = Prev Employment Surcharge wage type (/4PS) + value of Monthly Surcharge wage type (/4MS) deducted till date.

b)             Monthly Surcharge wage type (/4MS) = (Surcharge Payable wage type (/448) - Surcharge Ded Till Date wage type (/4TS) - Tax payable part of Section 89 relief wage type (/451)) / Projection Factor.

o                Monthly Taxable Income wage type (/4MI)

The system provides the closest approximation to the monthly gross income. This value is calculated as follows:

Assuming that the Gross Total Income (GTI) is represented as:

-                 Gross Total Income wage type (/434) for April = G1 * 12

-                 Gross Total Income wage type (/434) for May = G1 + G2 * 11

-                 Gross Total Income wage type (/434) for June = G1 + G2 + G3 * 10,

where, Gn is the Monthly Gross Income for the nth period.

Now, to calculate the value of G1 (Monthly Gross Total Income for April), the system divides the Annual Gross Total Income by the projection factor. Once G1 is available, the system can calculate further values using the following formula:

-                 G2 = ((G1 * Projection factor of previous period) + (GTI of current period - carried forward amount in the In Period due to retroactive run) - GTI of previous period) / Projection factor of current period.

Here, before computation, the GTI for current period and previous periods are reduced by the irregular incomes earned during that period because the irregular income is a one time payment. Also, as in the equation, the carried forward amount in the current period is not considered for the computation. This amount is also a one time payment and is added separately to the computed value.

-                 Monthly Taxable Income wage type (/4MI) = G2 (as computed above) + Mon Irr Income wage type (/125) + Carried forward amount (BF Basic Arrears wage type (/ZBS) + irregular income carried forward, if any)

Information got it from the system Go to PE04 and check the details.

Regards

Venkatesh

[Former Member · Accepted solution]

Hello Venkatesh,

This is really good,,, thank you so very much.

Now I have run payroll for a employee (below is his salary slip), My client says that the TDS deduction should be 1033/- but in SAP its been reflecting as 1446/- How can I know whats going wrong here.?

I can share my payroll log if u want me to share that too.

Please help me knowing this.

Regards

Tahir

[venkateshorusu · Accepted solution]

Can you share the log of INTAX input processing and Output for better understanding.

Regards

Venkatesh

[Former Member · Accepted solution]

Really appreciate your reply Venktesh. As u had asked for, plz find below the input/processing/output logs of INTAX

Log

INPUT

You can find PROCESSING and OUTPUT logs in my next reply.

Plz help

Regards

Tahir

[Former Member · Accepted solution]

Venkatesh, Following are my Processing and Output screen shots

PROCESSING 

OUTPUT

Regards

Tahir

[sikindar_a · Accepted solution]

please check the Gender of the employee and also PAN Details are maintained for the following pernr

[venkateshorusu · Accepted solution]

As far i understand tax is getting calculated on 172710 i.e 372710-200000 = 172710*0.1 = 17271 since it is getting calculated as 1446 where in normal case tax slab should 2,50,000 go to table V_T7INT1 check slab codes with the validity period 01.01.2014-31.12.9999 it should be SL31,SL32,SL33 and SL34 and check the slab rates for the same in table V_T7INT3 2,50,000 nil for men and women.

Regards

Venkatesh

[Former Member · Accepted solution]

Hello Venkatesh,

As u had asked, I checked both the tables and I could not find either of SL31,SL32,SL33 and SL34 maintained in both the tables. After SL30, its SR01. Below are the screen shots captured for the respective tables for your perusal.

Requesting you to guide me maintaining these in the said tables plz.

Screen shot for V_T7INT1

Screen shot for V_T7INT3

regards

Tahir.

[Former Member · Accepted solution]

Hello Sikindar,

I did check the gender - Its maintained correctly (as male, the employee is male)

And I checked for PAN too in IT185, it is also maintained.

Should I be detecting something else as well?? Plz guide

regards

Tahir

[venkateshorusu · Accepted solution]

It is problem with tax codes and slab rates go through below details.

Regards

Venkatesh

[sikindar_a · Accepted solution]

You can check the slabs as suggested by Venkatesh.

[Former Member · Accepted solution]

So nice of u Venkatesh,

I did the way u had asked me to. Maintained both the tables. U can find the screen captures below for both the tables. But the result is same. The amount reflecting against IncomeTax is still 1446/-.

Do u want me to look some where else as well??

Screen shot for V_T7INT1

Screen shot for V_T7INT3

Screen shot of PaySlip (the payroll is run for Aug' 14)

Plz Help me Venkatesh

regards

Tahir

[Former Member · Accepted solution]

Venkatesh,

For your reference, am sending u the input/Processing/output log of INTAX post changes on ur suggestions.

INPUT

PROCESSING

OUTPUT

[venkateshorusu · Accepted solution]

Go through note 2041819 and do the necessary correction as mentioned in the Note.

Regards

Venkatesh

[Former Member · Accepted solution]

Hello Venkatesh,

I followed the note 2041819 and did the configurations as were reflected in the same note (As u had suggested me to).. But I guess, the results are still not correct,, Now the Income Tax is coming too less..  Can u plz suggest me what else is to be checked? .. Below is the screen capture for your reference post applying the note 2041819.

regards

Tahir

[venkateshorusu · Accepted solution]

As far i understand it works fine place the INTAX input,processing and output from the log.

Regards

Venkatesh

[Former Member · Accepted solution]

Venkatesh, Sharing with u the details of INTAX

INPUT

PROCESS

OUTPUT

Plz help...

regards

Tahir

[venkateshorusu · Accepted solution]

It is working fine where the difference is /432 earlier it is 1,15,000 now it is 1,59,244 maximum should be 1,50,000 at configuration level for the same you have to configure V_T7INI7 and V_T7INI4 like below.

Regards

Venkatesh

[Former Member · Accepted solution]

Cheers Venkatesh, I was bothered about the calculations, If u have checked and said that the calculations are correct then I ll have a demo on this before the client and if client agrees then will mark ur reply as CORRECT ANSWER and shall close the thread,

Thank you so much, you are really quick in responding..

regards

Tahir

[Former Member · Accepted solution]

Thanks for the help Venkatesh,

Because u said the calculations are correct, am closing this thread.. Be blessed.

regards

Tahir