Income tax calculation on Medical Reimbursement

[Former Member]

Hi All,

I am facing some issue, please help me out.

1. Employee is getting salary every month of Rps.23000 without any exemption. In this case, Gross Salary is 276000 and Income tax is 52. It continues from April to June.

2. In the month of July, employee will get medical reimbursement of Rps .20000. Then its Salary becomes 43000. In this case, Gross Salary is 281000 and Income tax is 108 and same will be follow for the rest of months.

But, my client wants Tax calculation as, Medical Reimbursement 20000 - 15000(Exemption) = 5000. Income tax should be calculate separately for 5000 with 10.3%.

In this case, Income tax calculated as 515(5000 * 10.3%) + 52 ( Regular Itax) = 567.

In the next month onwards, Income tax should be calculated as 52 Rps for the rest of the month.

How to achieve this one.

How can I make use of INBTD for this.

Regards,

Vijay Kumar K.B

[Former Member · Accepted solution]

Try the below steps:

1) Create a new wage type e.g. 9MED Medical taxable (this will be internally computed by a PCR using the formula, Medical taxable =Medical reimbursement - 15000). This wage type should not be checked for any cumulation class in V_512w_d.

2) Create a new constant in V_t511K zmed for medical exemption limit, assign the value 15000.

3) Create a new PCR as below:

ZMED

*

nnnn (where nnnn is your medical reimbursement wage type)

ADDWT *

AMT?KZMED

*

>

AMT-KZMED

ADDWT 9MED

4) Add the wage type 9MED for all required allowance groupins in V_t7ina9.

5) Add the wage type 9MED in V_t7int9 and assign tax code SBON.

6) Update the value of constant BNTDS as 10.3 in v_t511k

7) Check if INBTD is currently called in your schema: it should be called as below:

INBTD BON1 SBON

Above this line, call the new PCR as below:

PIT ZNET <blank> NOAB

[Former Member · Accepted solution]

Hi,

Thank you for your valuable inputs.

What I made is, I create one dummy wage type called 9MED and I am passing the Original Medical Reimbursement (1030) to 9MED using custom PCR and I placed in after P0015 function.

In other PCR, I am passing 9MED to 9TDR to work like spot tax. This wage types will be maintained in V_T7ina9 and t9.

INBTD BON3 STDR

Now, income tax is calculating correctly.

I will just confirm with my users and will get back to you..

And one more, Employee Annual salary is 240000 in the month of April and there will be no tax. But due to Joining bonus of Rps 50000 his/her salary got increased to 290000 in the month of May. Same above procedure applied and income tax got deducted as per rule.

My question is will the tax comes into picture in the month of June???

Regards,

Vijay Kumar K.B

[Former Member · Accepted solution]

Tax should not be deducted in June since we have done a one-time deduction in May & the employee falls in the 10% slab. You can simulate payroll for June & confirm this.

[Former Member · Accepted solution]

Also please note that if you want a fixed rate of 10.3%, you should use BON1 & not BON3.

[Former Member · Accepted solution]

If I use BON1, education cess and surcharges are not considered for ITax calculation.

So I use BON3 to consider.

[Former Member · Accepted solution]

You can use BON1 & maintain 10.3 in the constant BNTDS.

If you use BON3, it will deduct & per the employee's income tax rate prior to bonus.

[Former Member]

Hi Tania/Praneeth,

I was checking one scenario on Medical Reimbursement and I came across one doubt.

1. Employee is getting gross salary of Rps. 15500/month with some exemptions and then there will be no Income tax from April to May.

In the month of June employee got Medical reimbursement of Rps. 20000. In this case, separate income tax should calculate. But its not happening if I used BON3.

If I used BON1, then /460 is generating for medical reimbursement. But Income tax is not getting deducted.

By increasing the regular amount to make it as taxable amount to check the scenario, then Income tax will get deduct.

Is it the same process across or please suggest me how to go ahead?

Regards,

Vijay Kumar K.B

[Former Member]

Yes, the reason for this is that BON3 is used to compute tax at the rate of tax prior to the one time payment. In this case, since the income prior to one-time payment falls in the non-taxable slab, no tax will be deducted.

You can use BON5 instead of BON3, the tax will be deducted at the rate applicable after the inclusion of one-time payment to the income.

[Former Member]

Hi,

If I use BON5, will the tax get deduct or else will it show only /460 in INBTD function for Medical reimbursement.

Write now /460 is generating under INBTD, but tax is not deducting.

Is it Right??

Regards,

Vijay Kumar K.B

[Former Member]

Whatever gets generated by INBTD adds to that month's income tax. Please verify this by checking for any employee.

[Former Member]

Hi,

Please find the document for your ref...

Regards,

Vijay Kumar K.B

[Former Member]

What is the value of /434 for the employee?

[Former Member]

/434 = 170520.

Regards,

Vijay Kumar K.B

[Former Member]

Hi Vijay,

System is acting correctly, while running one time tax deduction scenario system will check the previous live run for TDS and employee is non taxable that's why tax is not deducting.

as you said if you increase the regular amount to taxable then TDS will deduct accordingly to tax bracket.

[Former Member]

Hi,

Thanks both(Pranneth and Tania) of you...

So I am very clear with this concept..

Regards,

Vijay Kumar K.B

[Former Member]

Dear Vijay kumar,

This req. can be acheived by using function INBTD.

Schema - INN1

Taxcode - SBON

PCR - INRT

so many threads are there regarding this. find the below

tds on one time payment | SCN

Tax calculation in off cycle payment bonus | SCN

Best regards,

Praneeth kumar

[Former Member]

Hi,

Thanks Praneeth..

Actually I already used INBTD concept.

I taught is there any other process to capture Tax calculation.

Regards,

Vijay Kumar K.B

[Former Member]

Dear Vijay,

Happy to hear your issue solved.

Dont change the constant BNTDS value from 30 to 10.3, system will check the employee TDS bracket from the previous payroll run and dedcute the same.

we will do std configuration and if std is not feasiable to the client requirement then we go for PCR's and Enhancements. Most of the clients ask for std functionality only. for suppose client came with another requirement like Mobile re-imbursement then again you do pcr ?

my suggestion always go with std configuration if it is not fulfill our requirement then go for other possibalities.

Best Regards,

Praneeth kumar

[Former Member]

Hi,

No..  I didn't change the BNTDS value..

I am using BON3.

Thanks for your suggestion,

Regards,

Vijay Kumar K.B