Configure Termination Payments for India

You can process the different payments for the terminated employees with income tax as applicable.

Here are the different payments for the terminated employees:

• Leave Encashment

  The Leave encashment amount paid at the time of retirement is fully exempt from income tax for government employees where as it is either fully or partially exempt for private employee based on the rules provided by the income tax act.

  Calculate the leave encashment amount for the unutilized leave based on your organization policies. Enter this amount directly in the seeded element or using a custom logic in the fast formula. This amount will then be processed further by the seeded element ‘Leave Encashment Information’ for payment and tax exemption.

• Death cum Retirement Gratuity

  Death cum retirement gratuity is paid for the terminated employees with any termination reason. However continuous service rule is ignored in case of death and disablement. The seeded element ‘Gratuity Information’ calculates the gratuity amount to be paid with applicable income tax exemption.

  You can either write your own custom logic in the fast formula to calculate the gratuity payment amount or enter the amount directly in the seeded element to override the amount calculated by the seeded element.

  You can also define your continuous period of service for gratuity payment for each Income tax TRU.

• Commuted Pension

  Commuted pension amount received by the government employee is fully exempt from income tax whereas it is either partially or fully exempted in case of a private employee. The tax exemption depends on the percentage of total pension received as commuted pension and whether the employee received the gratuity payment.

  You can either write your own custom logic in the fast formula to calculate the commuted pension amount or enter the amount directly in the seeded element ‘Commuted Pension Information’ which will be further processed for payment and tax exemption,

• Voluntary Retirement Scheme (VRS) Amount

  You can either write your own custom logic in the fast formula to calculate the VRS amount or enter the amount directly in the seeded element ‘Voluntary Retirement Information’ which will be further processed for payment and tax exemption,

• Retrenchment Compensation

  You can either write your own custom logic in the fast formula to calculate the retrenchment compensation amount or enter the amount directly in the seeded element ‘Retrenchment Compensation Information’ which will be further processed for payment and tax exemption,

Configure Termination Payments

Here are the various steps to configure the termination payments.

1. Define element eligibility rules for the following seeded elements:

   • Gratuity Information

   • Leave Encashment Information

   • Commuted Pension Information

   • Voluntary Retirement

   • Retrenchment Compensation Information

2. Create a new action for Disablement due to accident or disease to be used for gratuity with the following details:

   1. Code: IN_DISABLEMENT

   2. Name: Disablement due to accident or disease or any meaningful name

   3. Description: Disablement due to accident or disease or any meaningful description

   4. Type: Terminate Work Relationship

   5. Country: India

   6. Start Date: Example: 01/01/2022

   7. End Date: Example: 12/31/4712

3. Enter the following information for gratuity in the Income Tax Basic Information for your income tax TRU

   • Employer classification

     Note: The employer classification information is also applicable for leave encashment.

   • Covered by Gratuity Act

   • Continuous period of service for Gratuity

4. Write your own custom logic in the fast formula for these allowances to calculate the payment with the following names respectively:

   • Leave Encashment - XXCUST_INDIA_LEAVE_ENCASHMENT_CALCULATION_FF

   • Gratuity - XXCUST_INDIA_GRATUITY_CALCULATION_FF

   • Commuted pension – XXCUST_INDIA_COMMUTED_PENSION_CALCULATION_FF

   • VRS Amount - XXCUST_INDIA_VRS_CALCULATION_FF

   • Retrenchment Compensation - XXCUST_INDIA_RETRENCHMENT_AMOUNT_CALCULATION_FF

5. Create the element entries for the seeded elements as applicable for the terminated employees.

6. You can optionally enter the input value Last Ten Months Salary for Leave Encashment in the seeded element Leave Encashment Information to override the ten months’ average salary calculated by default.

7. You can optionally enter the gratuity forfeit amount and forfeit reason as input value for Gratuity information element entry, if applicable for the terminated employee.

   Note: You need to copy paste the fast formula from the sample formula provided and insert your own custom logic in it.