Tax Setup – An overview

The Tax Setup- India component enables you to maintain the income tax setup.  The various activities that are involved in maintaining the tax setup are briefly explained below.

Create Tax Year: This activity enables you to define a tax year for an organization unit. Tax year refers to the period for which the tax is computed and paid to the tax authorities. Creating a tax year is a prerequisite to the creation and maintenance of the tax structure.  Creating a tax year involves specifying a unique code to identify the tax year, define the span of time for which the tax year is effective, by specifying the start and end dates.

Edit Tax Year: This activity is used to modify the details of a tax year record. Apart from modifying records, you can also delete the record from the database.

View Tax Year: Tax year is the period for which the tax is computed and paid. Through this activity, you can view all the details of various tax year records that have been created for the login tax setup unit.  Viewing tax year records involves specifying the search criteria based on which the system displays the records satisfying the search criteria.

Creating a Rate Table: Through this activity, you can specify a rate table based on which the employee’s tax is computed. The Income tax act specifies these rates for each financial year. It involves specifying the tax year and the range of income(s) for which the rate table is applicable.

Surcharge Rate Table: This activity, enables you can specify the surcharge rate table based on which employee’s tax is computed. Surcharge is the additional charge levied on the net tax liability of the employee. It involves specifying the tax year and the range of income(s) for which the rate table is applicable.

Section 16 Setup: Section 16 of the Income tax Act specifies deductions that the employee can avail. This activity enables you to specify the amount or the percentage of income that can be allowed as deductions.

Section 80 Deductions: Section 80 of the Income tax Act specifies a list of deduction items in which if the employee invests, avails deductions to a certain value. For example, contribution towards pension fund, medical premium etc. This activity enables you to specify the deductions applicable to the employee as per Section 80. It involves specifying the maximum value permitted to avail for each deduction item. The value must be specified either in amount or percentage of investments made.

Section 88 Rebates: Section 88 of the Income tax Act allows an employee to avail rebate on the liability if he/she invests the certain amount in securities as specified by the Income Tax authorities. This activity enables you to specify the amount/ percentage value of the investments made by the employee that can be availed as rebates. You can also specify the maximum amount that the employee can avail as tax rebate.

Section 10 Exemptions: This activity enables you to specify the list of exemptions and the maximum amount that the employee can avail for each exemption item as per the provisions of Income tax Act.

City Classification: This activity enables you to group cities to Metro and others. This classification is necessary, as the computation of various allowances like House rent allowance (HRA), depends on the city in which the employee resides.

Create Professional Tax Rate Table: This activity allows you to specify the professional tax amount applicable for different slabs of gross salaries.

Getting familiar with the activities inside