Withholding Taxes

This chapter provides overviews of tax computation process flow and delivered tax elements and discusses how to:

• Set up tax information.

• Maintain tax declarations.

• Enable self service functionality for tax declarations.

Understanding Tax Computation Process Flow

This section discusses:

• Income tax process flow.

• Profession tax computation flow.

Note. To examine the specifics of the calculations, use the core PeopleSoft Global Payroll application to examine the tax-related elements and rules.

Income Tax Process Flow

To calculate payee income tax to be withheld, the system:

1. Calculates taxable earnings.

   Taxable earnings are the sum of all earnings that a payee has received for the tax period, including previous employment earnings, basic salary from current employment, house rent allowance, and perquisites.

2. Totals previous and current employer exemptions.

   Previous and current employer exemptions for the payee are totaled. These exemptions can be items such as house rent allowance, conveyance, or leave travel allowance.

3. Calculates gross salary.

   Gross salary is calculated as taxable earnings minus exemptions.

4. Calculates the standard deduction, based on the previously calculated gross salary. Profession tax is taken into consideration during this step.

5. Calculates salary income.

   Salary income is Taxable Earnings – Exemptions = Gross Salary – Standard Deduction = Salary Income.

6. Calculate other income.

   Income from other sources is income derived by the employee from sources such as business income and income from capital gains. The employee may choose to declare this income to the employer. Such income or loss is added or reduced from taxable income while taxes for the year are determined.

7. Calculate gross total income.

   Gross total income is calculated by considering the total of all heads of incomes before allowing any deductions under chapter VIA.

8. Total chapter VIA deductions.

   All chapter VIA deductions (such as medical insurance or self-education) that the payee claims are calculated. Each deduction has a statutory limit defined in variables.

9. Calculate total taxable income (net income).

   Total taxable income (net income) is calculated as gross total income minus chapter VIA deductions. The tax liability of the assessee is determined based on this result. The rates of taxes applicable, and the rebates that are given, are all based on this amount. The applicability of the surcharge also depends on this result.

10. Calculate tax liability.

    The total taxable income (net income) is used to determine the applicable income tax rate. The income tax rates are stored in a bracket.

11. Apply rebates.

    Rebates are reductions from the tax liability of an employee. Rebates are allowed for employees who make certain investments during the current year. They include premium on life insurance and investments made in certain government-supported bonds such as Infrastructure bonds, RBI Bonds, and National Savings Certificates. A certain percentage of the investment is allowed as a rebate. This percentage is usually determined by the annual finance bill proposed every year.

12. Calculate balance tax.

    Net tax payable is calculated as the result of the tax liability minus the rebates.

13. Calculate surcharge.

    Surcharge is an additional levy on the net taxes of an employee. When the net tax payable is determined, the surcharge is calculated. The amount calculated is added to the taxable income and considered for tax deduction. This is the last step in the tax computation process. The amount calculated is prorated and deducted on a monthly basis.

14. Calculate net tax liability.

    The final tax liability is the result of the net tax payable plus the surcharge.

15. Determine monthly tax deduction.

    To determine the month's tax deduction for the payee, the balance tax of the employee is determined after reducing the tax deducted so far from the employee's tax liability for the year, and the balance determined. This is divided by the number of months left in the year and tax for the month determined. This is the amount that will reflect as TDS (tax deducted at source) month on month.

Profession Tax Computation Flow

The frequency with which you must deduct profession tax varies among states. The deduction frequencies for each state (monthly, quarterly, semiannually, or annually) are stored in variables, one variable for each state.

Rates and slabs that are applicable to each state are stored in brackets, one bracket for each state.

Each employee is linked to an establishment and the establishment is linked to a state. The rates that are applicable to each state are stored in a bracket.

Profession tax differs from state to state, and the deduction occurs based on the specified frequency. The amount deducted for profession taxes is considered for the calculation of the standard deduction as discussed in step 4 of the Income Tax process flow.

Note. Make sure that a payee's profession tax establishment is set up using the Establishment component (ESTABLISHMENT_DATA) in PeopleSoft HR because this information is vital to the proper calculation of a payee's profession tax deduction. This is the only source where an employee is linked to an establishment and an establishment to the state, therefore determining the correct deduction.

See Also

Accumulators

Setting Up Establishments

Understanding Delivered Tax Elements

This section discusses:

• Delivered tax earnings.

• Delivered tax deductions.

Delivered Tax Earnings

While the elements in this section are defined as earnings, they are actually used to store specific information. "Previous" in the following table refers to previous employment, such as "Previous Employment Salary." The elements in this section do not function as typical earning elements.

Global Payroll for India delivers the following elements to process payee taxes:

Delivered Tax Deductions

Global Payroll for India delivers the following tax deductions:

Note. PeopleSoft Global Payroll delivers a query that you can run to view the names of all delivered elements that are designed for India.

See Also

Viewing Delivered Elements

Defining Earning and Deduction Elements

Setting Up Tax Information

This section includes a common elements section and provides information on how to:

• Set up tax deductions.

• Set up tax exemptions.

• Set up other income.

• Set up perquisites.

• Set up previous employment income.

Common Elements Used in this Section

Understanding Tax Information Setup and Maintenance

To enter tax-related data as part of the setup and ongoing data maintenance:

1. Enter the income and profession tax-related information pertaining to the establishment.

   See Setting Up Establishments.

2. Define the setup for payee tax declarations and previous employment.

   You define the setup for each page in the Specify Tax Details IND component (GPIN_TDS_GEN).

   See Setting Up Tax Deductions.

3. Enter the declarations of a payee's general and house rent allowance tax information.

   See Setting Up Tax Exemptions.

   See Setting Up Other Income.

4. Enter the payee's rebate, previous employment, deduction, exemption, other sources, and perquisites tax information.

   See Setting Up Perquisites.

Note. Oracle provides tax element updates when amendments are made to the legislated rules governing income tax by the Central Finance Bill. However, for changes in slabs or rates, you must change the existing values to the amended rates or slabs.

Pages Used to Set Up Tax Information

Setting Up Tax Deductions

Access the Tax Setup – Deductions page (Setup HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, Income Tax Details IND, Tax Setup, Deductions).

Note. See field descriptions under the Common Elements heading at the beginning of this section.

Setting Up Tax Exemptions

Access the Tax Setup – Deductions page (Setup HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, Income Tax Details IND, Tax Setup, Exemptions).

Note. See field descriptions under the Common Elements heading at the beginning of this section.

Setting Up Other Income

Access the Tax Setup – Other Income page (Setup HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, Income Tax Details IND, Tax Setup, Other Income).

Note. See field descriptions under the Common Elements heading at the beginning of this section.

Setting Up Perquisites

Access the Tax Setup – Perquisites page (Setup HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, Income Tax Details IND, Tax Setup, Perquisites).

Note. See field descriptions under the Common Elements heading at the beginning of this section.

Setting Up Previous Employment Income

Access the Tax Setup – Previous Employment Data page (Setup HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, Income Tax Details IND, Tax Setup, Previous Employment Data).

Note. See field descriptions under the Common Elements heading at the beginning of this section.

Maintaining Tax Declarations

This section provides information on how to:

• Enter payee general tax information.

• Enter house rent allowance information.

• Enter information on Chapter VI A deductions.

• Enter other income information.

• Enter tax exemption information.

• Enter perquisites information.

• Enter previous employment income information.

Pages Used to Maintain Tax Information

Entering Payee General Tax Information

Access the General Information page (Global Payroll & Absence Mgmt, Payee Data, Taxes, Specify Tax Details, General Information).

Number of Children

Enter the number of children for the payee.

Employee Information

Dependent Information

Profession Tax

Income Tax

Note. Professional Tax (PT) is a tax on employment, which is paid to state governments based on the employee’s region, their income slab, and other criteria. The employee’s disability and senior citizen status provides certain exemptions to the employee from PT deductions. To calculate the exemptions correctly, the system looks at the check boxes on the Tax Detail pages. Additionally, the system uses the Generation Control Formula (GC FM) to retrieve these statuses and pass the information or values to the PT Exemption formula.

Entering House Rent Allowance Information

Access the HRA Details page Global Payroll & Absence Mgmt, Payee Data, Taxes, Maintain Tax Declarations IND, HRA Details).

The HRA (House Rent Allowance) calculation accommodates the monthly HRA exemption.

Entering Deductions Under Chapter VI A

Access the Deduction page (Global Payroll & Absence Mgmt, Payee Data, Taxes, Maintain Tax Declarations IND, Deduction).

Description	Displays the type of deduction.
Declared Amount	Enter the amount declared by the payee for the deduction type.
Approved Amount	Enter the amount that the payee can claim for the deduction from their gross total income. The payroll administrator enters the approved amount once the declared investment passes the verification process.
Verified	If the declared investment has completed the verification process, the payroll administrator selects this check box and the approved value is considered the final declaration for income tax computation.
Date Verified	Displays the date the amount was verified.
Copy Declared to Approved	After completing the verification process, a payroll administrator can click this button to copy all the declared investments to the approved column all at once instead of entering data manually.
Verify All	Click to verify all amounts. The system selects the Verified check box for all fields that have entries in the Declared Amount fields.
Verify None	Click to remove all the check marks in the Verified fields.

Entering Other Income Information

Access the Other Income page (Global Payroll & Absence Mgmt, Payee Data, Taxes, Maintain Tax Declarations IND, Other Income).

Note. See field descriptions in the previous section: Entering Deduction Information.

Entering Exemption Information

Access the Exemption page (Global Payroll & Absence Mgmt, Payee Data, Taxes, Maintain Tax Declarations IND, Exemption).

Note. See field descriptions in the Entering Deduction Information section.

Entering Perquisites Information

Access the Perquisites page (Global Payroll & Absence Mgmt, Payee Data, Taxes, Maintain Tax Declarations IND, Perquisites).

Note. See field descriptions in the Entering Deduction Information section.

Entering Previous Employment Income Information

Access the Previous Income page (Global Payroll & Absence Mgmt, Payee Data, Taxes, Maintain Tax Declarations IND, Previous Income).

Note. See field descriptions in the Entering Deduction Information section.

Enabling Self Service Functionality for Tax Declarations

Global Payroll for India calculates taxes for employees based on the applicable tax rules. As stated in the Indian Income Tax Act, employees are expected to declare their investments, which allows employers to accurately calculate taxes.

This section provides an overview on self service setup and maintenance for tax deductions and provides information on how to:

• Administer SSD periods.

• Use the Self Service Tax Savings Declarations page.

• Migrate data.

Understanding Self Service Setup and Maintenance for Tax Deductions

You have the option to use self service functionality or continue to use the existing Maintain Tax Declaration (MTD) functionality. If you decide to use self service functionality, the Payroll Administrator must use the Administer SSD Periods page to define the Self Service Tax Savings Declarations template.

Payroll administrators can use self service for the pay entity as a whole or for specified pay groups or payees.

The system enables payroll administrators to notify employees when the open period starts during which employees are allowed to declare tax saving investments through the Self Service Tax Declarations page and when the system is closed to new entries (freeze date).

The system then posts the selected tax declarations. Declared investments pass through the defined validation and verification process. The declarations are then considered for income tax computation during the respective pay period.

The payroll administrator then:

• Runs the pay process.

• Reviews pay results.

• Generates payslips and Income Tax Computation Statements (ITCS).

Employees access the self service page to verify their payslips and ITCS to ensure that their declarations and tax calculations were processed correctly. Depending on your internal policies, if the payroll administrator or employee finds discrepancies in the declarations that were processed, the data is corrected and processed accordingly in the same pay period or in a succeeding pay period.

In addition, employees have to provide a self-attested declaration to assure that the proofs and information submitted are true and fair. To facilitate this we have provided an option in the self-service page to generate a report called Tax Saving Investment Declaration Form. The report is generated using Oracle’s XML Publisher.

Pages Used to Enable Self Service Functionality for Tax Declarations

Administering SSD Periods

Access the Administer SSD Periods page (Set Up HRMS, Product Related, Global Payroll & Absence Mgmt Taxes, Administer SSD Periods IND, Administer SSD Periods).

Current Tax Year	Enter the current tax year for which you want to enable self service tax declarations.
Pay Entity	Select the pay entity for which you want to enable self service tax declarations.
Enable Self Service	Select this check box for the pay entity, pay group, and employees for whom you want to enable self service tax declarations functionality.
Open From and Open Till	Enter the first and last day of the month from which you want to enable self service tax declarations functionality for the pay entity, pay group, or employees. Note. To span the open period across two consecutive months, enter a higher number in the Open From field. For example, if you want the open period to start on October 25th and end on November 5th, enter October in the Month field, 25 in the Open From field and 5 in the Open Till field.
Freeze Date	Enter the final date that you will allow employees to enter self service tax declaration information through self-service. The freeze date is the year end cut off date in which employees can edit information. After this date, access is ceased and employees will have read-only access to the self service Tax Savings Declarations page.
Notify	Select this check box if you want to notify by email the payees associated with pay entity, pay group, or employee ID regarding the open period or freeze date.
Open Period Notified on	This field displays the date on which the pay entity, pay group, or employee was notified about the open period.
Freeze Date Notified on	This field displays the date on which the pay entity, pay group, or employee was notified about the freeze date.
Pay Group	Select the pay group for which you want to enable self service tax declarations.
Empil ID (employee ID)	Select the employee ID for which you want to enable self service tax declarations.
Month	Select the month for which you want to enable self service functionality.
Notify about	Select either Freeze Date or Open Period.

Using the Self Service Tax Savings Declarations Page

Access the Tax Savings Declarations IND page (Self Service, Payroll and Compensation, Tax Savings Declarations IND, Tax Savings Declarations IND).

When an employee accesses the Tax Savings Declarations IND page, all the above chapters are in collapse mode. Click the chapter heading to display the group box associated with the heading or click Show All Chapters.

Chapter VI A - 80CCC

Click the Chapter VI A - 80CCC chapter heading to display the following group box:

Help	Click to display text which provides an awareness or educates an employee about the tax saving investments, eligibility criteria, and minimum and maximum amounts for deductions that are available for income tax provisions.
Saved Amount	This is an editable field where an employee declares the amount of their investment.
Approved Amount	This is an amount which an employee can claim as a deduction from his or her gross total income. This is a non-editable field and data comes from the Maintain Declaration page post payroll administrator’s verification process.
Verified	Using the in Maintain Tax Declaration pages, a payroll administrator declares the approved amount as verified. If the declared investment has completed the verification process, then this check box will have a tick and be considered as the final declaration for income tax computation.
Upload	Click this link to upload scanned copies of investments receipts. This functionality: Mitigates the time consuming process when a payroll administrator has to wait until the employee receives hard copy of bills and receipts. Makes the verification process faster and simpler. However, the employer has to comply with the regulation for collecting and preserving the documents pertaining to the investments declared by the employees. Note. Only JPG and PDF files are supported.

Chapter VI A - 80C

Click the Chapter VI A - 80C chapter heading to display the following group box:

Note. See the field descriptions in previous section.

Chapter VI A - Others

Click the Chapter VI A - Others chapter heading to display the following group box:

Note. See the field descriptions in the Chapter VI A - 80CCC section.

Other Income

Click the Other Income chapter heading to display the following group box:

See the field descriptions in the Chapter VI A - 80CCC section.

Previous Employment Income

Click the Previous employment chapter heading to display the following group box:

The Previous employment group box is displayed only when an employee is hired during the middle of the tax year, otherwise the group box will not be listed on the Tax Savings Declarations IND page.

Note. See the field descriptions in the Chapter VI A - 80CCC section.

HRA Details

Click the HRA Details chapter heading to display the following group box:

Effective Date	The effective date on which employee started paying rent.
Location	The metro or non-metro place where the employee resides.
Approved Rent	The amount of rent that an employee can actually claim.
Verified	See the field descriptions in the Chapter VI A - 80CCC section for an explanation.
Insert Row and Delete Row	In cases where the employee has multiple rents to declare or changes in rent paid data, they can use these buttons to add or delete rows.
Rent Paid	Actual rent paid by the employee.

View/Add Receipts

Click the View/Add Receipts chapter heading to display the following group box:

Employees have the option to upload the receipts against their declarations in the respective group boxes. In addition, this group box provides employees with the option to upload or delete the uploaded files at once, if employees chooses to do so.

There is a prompt button in the tab. Clicking the button accesses a page listing all the investment declaration items. The Add Attachment and Delete Attachment buttons enable employees to add or delete the uploaded receipts.

Migrating Data

Access the Self Service Data Migration IND page (Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, Self-Service Data Migratin IND, Self Service Data Migration IND).

You can migrate information from the older data structure to the newer data structure in the middle or start of the financial year. The migration application engine (GPIN_SS_DTCV) performs the required data conversion and mapping to move data from the old table (Payee Override) to the new data structure. This run-control page is provided to execute the process that starts the application engine.

Use the selection criterion fields and filters to run the application engine for employees, pay-groups, or pay-entities.