Create Bonus Taxation Element

Create a bonus element to compute and deduct the income tax on bonus using one of the 3 taxation methods.

Let's look at these taxation methods you need to use, when you create the bonus element.

1. Fixed Percentage Taxation: Bonus is taxed using a fixed percentage in the period it's paid. If any extra tax needs to be deducted, it's adjusted during the remaining pay periods in the financial year.

2. Distributed or Regular Taxation: Bonus amount is added to the gross total income and the tax is calculated in the same way as other earnings. The extra tax payable because of the bonus payment, is distributed equally for the remaining pay periods, including the current pay period.

3. Lump Sum or Spot taxation: Bonus is added to the total taxable income to derive the total income tax for the financial year. The additional tax because of the bonus payment is deducted in the same period in which the bonus is paid.

Use the Elements task in the Payroll section of My Client Groups to create the Bonus element. Choose the secondary element classification Bonus with the required taxation type, based on your requirements.

To create the bonus element:

Navigation: My Client Groups > Show More > Payroll > Elements

1. On the Elements page, select Create.
2. Complete these fields, as shown in this table:

   Field	Value
   Legislative Data Group	Select an appropriate LDG
   Primary Classification	Earnings
   Secondary Classification	Bonus
   Category	Standard

3. Select Continue.
4. On the Basic Information page, complete the fields for the bonus element, and select Next.

   Field	Value
   Name	Enter a name, example: Bonus Earnings1
   Reporting Name	Enter the name that you want to display on reports for this deduction payroll 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
   At which employment level should this element be attached?	Assignment Note: Assignments are associated with jurisdictions, which determine 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?	Select one of the options: Process and pay with other earnings Process separately, but pay with other earnings Process separately and pay separately

5. On the Additional Details page, respond to the questions, as shown in this table:

   Field	Value
   What is the calculation rule?	Flat amount
   Is this element subject to proration?	Yes
   Proration Group	Select a proration group
   Proration Rate	Select a proration rate
   Proration Units	Workday
   Is this element subject to retroactive changes?	No

6. In the Earnings Rules, select the applicable Bonus Taxation Type.
   • Fixed Percentage
   • Lump sum or Spot
   • Distributed or Regular
7. Answer the India specific questions to create the required balance elements.

   Question	Value
   Does this element contribute to Employee State Insurance computation base salary?	Select Yes or No
   Does this element contribute to Leave Encashment exemption computation salary ?	Select Yes or No

8. Select Next twice. Verify that the information shown on the Create Element: Review page is correct.
9. Select Submit.

Results:

The formula <element name>_BONUS_CALCULATION is linked to the status processing rule for the Bonus element.

Whenever a bonus element is created, it feeds the balances:

• Net Pay

• Gross Pay (base name: IN_GROSS_PAY)

• Earnings (base name: IN_EARNINGS)

The balance feeds for ESI Computation Salary and ESI Eligible Salary are also created.