1.2.2.2 Defining Slabs and Tier Structures

You can define the tax that you would like to apply to a contract, in terms of a tier or a slab structure.

Through this screen, first specify if the Basis Amount (on which tax is calculated) should be taken as a slab or a tier. Indicate Cumulative (by selecting the check box), if the Basis Amount structure is a Tier. Leave it blank if the Basis Amount structure is a Slab.

The following example illustrates how this works:

Example

You have the following Amount Basis (cumulative) structure for a Tax Rule defined for tax on the deal amount:

Amount	Rate
0 to 250,000	1%
> 250,000 <= 1 Million	2%
> 1 Million <= 3 Million	2.5%
> 3 Million	3%

When this tax rule is applied on a deal of USD 1.5 million, the rate of tax is calculated depending on whether the Amount Basis has been defined as a slab or as a tier. The different methods are calculated as follows:

• Tier basis

  The first 250,000 is taxed at 1%

  Amount from 250,001 to 1,000,000 at 2%

  Amount from 1,000,001 to 1,500,000 at 2.5%

• Slab basis

  The entire USD 1.5M is taxed at 2.5%