1. Implementing Payroll for India
  2. Allowances Element for India

Allowances Element for India

Allowances include the employee benefits provided by an employer, which is part of the Earnings component.

There are various allowances provided by the employer to the employee. Some of these allowances are exempt from income tax either fully or partially in section 10. You can setup these allowances using element templates. The tax exemption is automatically calculated on these

The allowances which are exempted in Section 10 for the income tax computation are supported. This is captured in the Allowance element for India localization, which has predefined calculation rules. The calculation rules for the below allowances are generated when you create the element using the related template.

The following Allowance Types are supported in the Primary Element Classification Allowances. You can create the element and associate the appropriate allowance type.

  • Academic Allowance
  • Conveyance Allowance
  • Children Education Allowance
  • Compensatory Field Area Allowance
  • Compensatory Modified Field Area Allowance
  • Daily Allowance
  • Helper Allowance
  • High Altitude Allowance
  • Hostel Expenditure Allowance
  • House Rent Allowance
  • Leave Travel Assistance
  • Other Allowance
  • Special Compensatory Allowance
  • Travell Allowance
  • Transport Allowance for Physically Disabled
  • Tribal Area Allowance
  • Uniform Allowance
  • Under Ground Allowance

Use the Elements task to create the allowances element, using the primary classification Allowances and the allowance type Allowances. In the Earnings Rules, select No for all the questions. On the Element Summary page, update the newly created element details. Create the eligibility record for the element.

Note: All allowances are subject to income tax unless you select the secondary classification as a non-taxable allowance.

Some of these elements may be part of regular salary or some could be one-time payments. Some may be partially exempted from tax and some may be fully exempted from tax depending on statutory threshold and subject to actual expenses submitted by the employee.

Create Element for LTA

Use the Elements task to create the allowances element for leave travel assistance, using the primary classification Allowances and the allowance type LTA. In the Earnings Rules, select No for all the questions. On the Element Summary page, update the newly created element details. Create the eligibility record for the element.

Following details need to be captured for processing the claims of LTA:

  1. LTA period

  2. From date

  3. To date

  4. Details of bills

  5. Name

  6. Relationship

  7. From

  8. To

  9. Mode of transport

The custom balances created for the LTA element are added to the balance groups:

  1. IN SOE Earnings balance group with balance category Supplemental Earnings

  2. India Payroll Archive Allowances balance group with balance category: Supplemental Earnings

These balances added to the above balance groups can be removed as these are custom balances created. If LTA component need not be displayed in the payslip, you can remove it manually from the balance group India Payroll Archive Allowances balance group.

You can't remove the below information balances from the balance group India Payroll Archive Earnings balance group:

  • LTA Nontaxable Amount

  • LTA Taxable Amount.