HR Payroll and Taxation Concepts

Jon Boyes
Employability and Graduate Development
PGDHRM
www.hrspot.co.in
Kolkata | Bhubaneswar | Hyderabad
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Advanced Payroll Management
Post Graduation Diploma in Human Resource Management
Advanced Payroll Management 1

Taxable and Non-taxable
Components of CTC

Components Taxable/Non Taxable
Basic Fully Taxable
House Rent Allowance Partially Taxable
Leave Travel Allowance LTA is exempted from tax twice in a block for 4 years
Conveyance Allowance Earlier [INR. 19,200 per Annum is exempted from Tax]; Now [CA and MA
cumulatively 40,000 per Annum is exempted from Tax]
Medical Allowance Earlier [INR. 15,000 per Annum is exempted from Tax]; Now [CA and MA
cumulatively 40,000 per Annum is exempted from Tax]
Other Allowances Fully Taxable
Provident Fund Fully Tax Exempted
Gratuity Fully Tax Exempted
Employees State Insurance Fully Tax Exempted

Income Tax and
Tax Deducted at Source

Income =
taxable components of income + income from other source – any investment
(As per Income Tax Law)

 Income tax is levied on all individuals or corporate for the income earned above the tax
limit for that particular period
 TDS is tax deducted at source, where the tax is deducted at the source of income,
merely assuming that you have taxable income
 Income tax is paid on the annual income, where as TDS is deducted at source on a
periodic basis in the particular year

 A taxpayer will have to pay income tax on his total annual income, where TDS is only
his partial contribution to his total annual income
 In case of TDS, the tax is deducted by the payer and is remitted to the Government by
the payer on behalf of the payee
 Income tax should be paid by the taxpayer

 If a taxpayer's income is below the taxable limit and TDS is deducted then he can claim
for the same in his tax returns
 TDS is deducted in cases such as from salary income, fixed deposits, etc.

Income Tax and Tax
Deducted at Source
Calculation

Taxable Income Tax Percentage
INR. 0 – 2,50,000 0%
INR. 2,50,001 – 5,00,000 5%
INR. 5,00,001 – 10,00,000 20%
Above INR. 10,00,000 30%

CTC Structure: INR. 6,00,000 per annum in Bhubaneswar
Components Amount
Basic INR. 3,00,000
House Rent Allowance INR. 1,45,000
Leave Travel Allowance INR. 60,000
Conveyance Allowance INR. 20,000
Medical Allowance INR. 20,000
Other Allowance INR. 17,170
PF (employer) INR. 23,400
Gratuity INR. 14,430
ESI (employer) INR. 0
Total INR. 6,00,000
This is the CTC Structure mentioned in
the in the appointment letter of a
particular employee
We will take this CTC Structure and will
use this as example for Tax Calculation

Out of this 3 below criteria, whichever is lower in value will be deducted from the HRA in
CTC while calculating Taxable Income
 1. HRA mentioned in CTC structure
 2. 50% of Basic in Metro/40% of Basic in Non Metro
 3. Actual Rent Paid – 10% of Basic

HRA Income Tax Calculation
 Basic in Bhubaneswar = INR.
3,00,000
 HRA offered by HR in
Appointment Letter = INR.
1,45,000
 Resides at a rented house with
per month rent = INR. 10,000

Basic in Bhubaneswar = INR. 3,00,000
HRA offered by HR in Appointment Letter = INR. 1,45,000
Resides at a rented house with per month rent = INR. 10,000
 Tax exemption calculation
 1. HRA = INR. 1,45,000
 2. 40% of Basic= INR.
1,20,000
 3. Actual Rent Paid – 10% of
Basic : INR. 90,000 (INR.
1,20,000 – INR. 30,000)

Basic in Bhubaneswar = INR. 3,00,000
HRA offered by HR in Appointment Letter = INR. 1,45,000
Resides at a rented house with per month rent = INR. 10,000
 Lowest is INR.90,000
 Hence the Taxable income of
HRA is INR. 1,45,000 (Actual
HRA) – 90,000) = INR. 55,000

CTC =INR. 6,00,000 Net Salary Net Taxable Income
Basic INR. 3,00,000 INR. 3,00,000
House Rent Allowance INR. 1,45,000 INR. 55,000
Leave Travel Allowance INR. 60,000 N/A
Conveyance INR. 20,000 N/A
Medical Reimbursement INR. 20,000 N/A
Other Allowance INR. 17,170 INR. 17,170
PF (employer’s) INR. 23,400 N/A
Gratuity INR. 14,430 N/A
ESI (employer’s) INR. 0 N/A
PF (employee’s) [12% of Basic] INR. 21,600 INR. 21,600
ESI (employee’s) [1.75% of Gross Pay] INR. 0 INR. 0
Net Income INR. 5,78,400 INR. 3,50,570

Net Income (As per last slide) = INR. 3,50,570
Slabs Amount
(INR.)
Tax
Percentage
Tax Amount to be paid
INR. 0 – 2,50,000 2,50,000 0% INR. 0
INR. 2,50,001 – 5,00,000 1,00,570* 5% INR. 5,029
INR. 5,00,001 – 10,00,000 N/A 20% N/A
Above INR. 10,00,000 N/A 30% N/A
Total 3,50,570 INR. 5,029
* The balance amount = 3,50,570 – 2,50,000 = 1,00,570

Examples of Tax Calculation

Net Income = INR. 9,00,000
Slabs Amount (INR.) Tax
Percentage
INR. 0 – 2,50,000 2,50,000 0% INR. 0
INR. 2,50,001 – 5,00,000 2,50,000 5% INR. 12,500
INR. 5,00,001 – 10,00,000 4,00,000 * 20% INR. 80,000
Above INR. 10,00,000 N/A 30% N/A
Total 9,00,000 INR. 92,500

Net Income = INR. 12,00,000
Slabs Amount (INR.) Tax
Percentage
INR. 0 – 2,50,000 2,50,000 0% INR. 0
INR. 2,50,001 – 5,00,000 2,50,000 5% INR. 12,500
INR. 5,00,001 – 10,00,000 5,00,000 20% INR. 1,00,000
Above INR. 10,00,000 2,00,000 * 30% INR. 60,000
Total 12,00,000 INR. 1,72,500

Class Activity

Tax Calculation
All Students will be asked to do Tax Calculation from CTC with different sets
of problems.
Individual Activity: 120 min

Advanced Payroll
Management
Post Graduation Diploma in Human Resource Management
Advanced Payroll Management 2

Advanced Payroll
Management
Payroll Software

Online Attendance
Processing

Advanced Payroll
Management
Online Leave Processing

HRMS/HRIS

ESS

MSS

Payroll Software Practice
All Students will be asked to practice Payroll Software.
Group Activity: 120 min

HR Payroll and Taxation Concepts

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