Voluntary Deductions for India

Voluntary deductions are deductions that an employee chooses to pay through their salary instead of making the payments directly.

The deductible amount is either a fixed amount or a percent of the total earnings during a payroll run.

India Payroll supports the following voluntary deduction

• Medical insurance premium deduction in Section 80D

• Donation contributions deduction in Section 80G

• Loan deductions

• Other deductions 

The scenarios when you could create voluntary deduction elements are:

• When employees avail loan or salary advance from employers and opt for recovery of the amount through installments in their monthly payroll.

• When employees enroll for parental insurance or extra coverage(Top-up) of existing medical insurance. They opt for recovery of the annual premium amount in their monthly payroll by splitting into 6-12 installments.

• When employees opt for some amount to be deducted from their monthly salary and want the amount to contributed toward donation for charitable societies and relief funds. This can be claimed as exemption in section 80G.

To create the voluntary deductions element:

1. Use the Elements task to create the voluntary deduction element, using the primary classification Voluntary Deductions.

2. On the Basic Information page, complete the fields, as shown in this table:

   Field	Value
   Name	Enter a name, example: Voluntary Deductions1
   Reporting Name	Enter the name that you want to display on reports for this deduction element.
   Effective Date	Enter an early date so that the payroll element is available for use immediately.
   Input Currency	Indian Rupee
   Should every person eligible for the element automatically receive it?	No
   What is the earliest entry date for this element?	First Standard Earning Date
   What is the latest entry date for this element?	Last Standard Earning Date An element's latest entry date decides how element entries process after a person leaves from organization or transfers to another payroll. This is before a pay period end date. If you select this date, then you need to enable proration, so the calculation will be correct if a person leaves.
   What should happen when there are insufficient funds to cover the deductions? If you enable arrears, a reference is required for each deduction entry.	Select one of the options: Do not take a partial deduction or create arrears Do not take partial deduction, place all in arrears Take a partial deduction, but do not create arrears Take a partial deduction, place remaining in arrears Based on your choice, the particular calculation logic is used.
   At which employment level should this element be attached?	Assignment Note: Assignments are associated with jurisdictions, which decide the required tax calculations.
   Does the element recur each payroll period, or does it require explicit entry?	Recurring
   Process the element only once in each payroll period?	Yes
   Can a person have more than one entry of the element in a payroll period?	No
   Process and pay element separately with other earnings element?

3. Click Next.

4. On the Additional Details page, complete the information as shown in the table:

   Field	Value
   Deduction Type	Select an option from the dropdown: Deductions for 80D Deductions for 80G Deduction for Concessional Loan Other Deductions
   Coverage	Select one of the coverage options from the dropdown: Parents Self and family Note: The coverage option appears only if you've selected the deduction type as Deductions for 80D. You need to create separate elements for parents coverage and self and family coverage. The element for self and family coverage will feed the balances for tax exemption deductions in section 80D computation. Similarly, the element for parents coverage feeds those balance created, based on the parents coverage type.
   What is the calculation rule?	Fixed amount deduction: A fixed amount is deducted every month. Percentage deduction: A percentage of an eligible earnings is deducted. For Percentage deduction, a balance with the name <Base Element Name>  Eligible Compensation is automatically created. The deduction amount is calculated based on the run value of the eligible compensation balance and percentage entered in the element entry.
   Is this element subject to retroactive changes?	Select Yes or No.
   Do you want to stop processing when the total owed is reached? If you enable total owed, a reference is required for each deduction entry.	Select Yes if there are any payments made to employees like house loan, education loan that need to be recovered. If you select Yes, there are 3 more input values fields to enter in the next page Total Owed, Total Owed Indicator and Deduction Reference appear. Otherwise, select No if there are no payments to be recovered.

   Note: By default the processing priority for the elements created for voluntary deduction is 4000, to be included the deduction amounts in the perquisite calculations. During implementation, you can change the processing priority value based on your business needs.

5. On the Element Summary page, verify the element details.

6. Click Submit.

7. Create the eligibility record for the element.