Tally Lesson 5 Payroll Accounting

Tally Payroll Masters

Note: If you find it difficult to understand read Explanation in this colour .

Payroll means list of employees who work in company & entitle to payment of salary and wages according to their relevant pay structure & performance.

Features of payroll Accounting in tally

Integration of payroll accounting with day to day accounting

· Support for user-defined Earnings and Deductions Pay Heads.

· Unlimited grouping of payroll masters

· Flexible and user-defined criteria for simple or complex calculations.

· Flexible processing period for payroll.

· Predefined processes for accurate and timely salary processing, employee statutory deductions & employer statutory contributions.

· Processing payments using the e-payment capability in Tally erp 9.

· Auto-fill facility to expedite the attendance, payroll and employer's contribution processes.

· Accurate computation and deduction of statutory payments such as Income Tax, ESI, EPF, NPS, Professional Tax, and Gratuity.

· Generate statutory forms and challans for Income Tax, EPF & ESI, as prescribed.

· Facility to drill-down to the voucher level for any alteration.

· Compute arrears of previous period

· Track loan details of employee

Enabling Payroll in Tally ERP 9

You can enable payroll in Tally .ERP 9 from the Cost/Profit Centres Management section under F1: Accounting Features in F11: Features

To enable Payroll in Tally ERP 9

1. Go to Gateway of Tally > F11: Features > F1: Accounting Features .

2. Tab down to Cost/Profit Centres Management section.

3. Set the option Maintain payroll to Yes.

4. Set the option Maintain more than payroll or cost category to Yes , to allocate employee cost by creating separate employee categories.

5. Press Enter to accept and save, and return to the Gateway of Tally screen.

Enabling Payroll Statutory Features (Payroll)

To use the Provident Fund, Employee State Insurance (ESI), National Pension Scheme (NPS), Income Tax and Professional Tax features for Indian Payroll, you must enable Statutory Features for Payroll.

1. Go to Gateway of Tally > F11: Features > F3: Statutory & Taxation .

2. Set Enable payroll statutory to Yes .

3. Enable the option Set/alter payroll statutory details . Enter the relevant details.

In the Provident Fund section,

1. Enter company code as allotted by the PF department.

2. Enter Company Account Group Code as specified by the PF department.

3. Enter Company Security Code as specified by the PF department.

In the Employee State Insurance section,

1. Enter Company Code as allotted by the Employee State Insurance Corporation (ESIC).

2. Enter the name of the ESI Branch Office.

3. In the Standard Working Days (per month) field, enter the number of days to be considered for the calculation of daily wages, and monthly gross amount for ESI benefits. If this field is left blank, the system considers the Calendar Period as the basis for calculation.

In National Pension Scheme section,

1. Specify the Corporate Registration Number as allotted by the Central Recordkeeping Agency (CRA) during registration.

2. Specify the Corporate Branch Office Number allotted by the Central Recordkeeping Agency (CRA) during registration.

In the Income Tax section,

1. Specify the 10 digit TAN assigned to the employer in Tax deduction and collection Account Number (TAN) .

2. Specify the TAN registration number .

3. Specify the name of the Income Tax Circle/Ward , to which the employer is associated.

4. Select the Deductor Type as:

o Government for central or state government companies.

o Others for other companies.

5. Enter the name of Deductor branch/division .

6. Enter the Name of Person Responsible for TDS deduction in the company.

7. Enter the father's name of the person who is responsible for TDS deduction in the company, in the field Son/Daughter of .

8. Specify the official Designation of the person who is responsible for TDS deduction in the company.

9. Specify the PAN .

Press Enter to accept and save.

Configuring Payroll

You can use the Payroll Configuration screen to configure some basic aspects of Payroll.

To configure Payroll

1. Go to Gateway of Tally > F12: Configure > Payroll Configuration .

2. Set the option Add notes for employees to Yes to enter any additional information about the employee in the employee creation screen.

3. Set the option Show statutory details (for India/ SAARC companies only) to Yes to enter the PF, ESI, NPS and Employee PAN details in the employee creation screen, and print the same information in the employee pay slip.

4. Set the options Provide passport and visa details and Provide contract details to Yes to capture and display the following information in the Expat Reports:

● The employee's Passport Number, Passport Expiry date, Visa Number, and Visa Expiry date,

● The employee's Contract Start and Expiry dates in the employee Master.

5. Set the option Show resigned/retired employees to No , to avoid displaying the names of resigned employees in the attendance and payroll vouchers.

6. Set the option Show employee display name to Yes , if the payroll reports need to include a different name for the employee, while printing.

You can configure additional printing preferences using the payroll print configuration screen.

Payroll Masters

Following are 5 steps given below to complete payroll masters

For payroll Masters there are different types of element such as employee, their groups , classification ,payroll units such as hrs ,Attendance such as present/absent/paid leave, pay heads, payroll vouchers etc each have their own importance in completing the whole process of payroll accounting.

To do payroll Accounting one need to understand all these aspect rather than just follow them

Following is explanation of each of these aspects and later the whole process to follow to do payroll accounting is given

In layman (simple) terms

Explanation of payroll elements/aspects:

1^st of all there is entry of employee & his details known as employee master

2^nd there is Employee group to classify them based on their work department ,division ,function, activity for e.g department wise means sales production ,Accounts, marketing, research & development etc such classification helps to identify employee cost associated with particular department ,activity ,function etc

3^rd there is Employee category (primary category) which helps to further classify employee & is rarely used if a particular group as multiple business then they can classify employee of particular business in different category to know cost associated with each business differently.

4^th of all payroll units , to pay wages/salary there has to be unit measurement based on which salary/wages is accrued such as hour, shift, day ,week etc

5^th there is attendance/production type , now salary accrues every day but measure has to be there whether employee is present or absent or doing overtime so attendance/production type is present , absent , overtime.

6^th there is pay head these are elements of salary which are paid to employee

These pay head element can be earning(basic ,dearness allowance etc) or deduction(professional tax) or statutory deductions (PF ,ESIC etc).

7thly there is salary/wages pay structure there can be more than one pay structure for each different employee or group of employee can have same structure . pay structure refer to percentage of amount given to different pay head .

8^th there is vouchers to passed based on actual data collected about no of days present , employee etc in payroll there is only 2 vouchers 1.payroll 2.Attendance.

Lets start with process now :

Creating Employees (Payroll)

After enabling payroll & config 1^st we will start with recording information of employee . Tally ERP 9 allows to record all employee related information. In addition to general information, you can also enter Payment, Statutory, Expat and Contract details of employees. To enter Statutory related information in the Employee Master, enable the option Show Statutory Details in the payroll configuration screen.

Creating Single Employee

1. Go to Gateway of Tally > Payroll Info. > Employees > Create (under Single Employee ).

2. Enter the Name of the employee. By default, the system displays the same value in the Display name in reports as .

3. Modify the Display name in reports as , if required.

4. Select the Employee Group in the field Under.

5. Enter the Date of joining.

Note that date of resignation/retirement is available only on alteration screen

6. Set the Define salary details? option to NO , and press Enter , we will set salary details later.

10. Enter the employee General Information ,employee bank details for salary processing, Payment Details , Statutory Details , Passport & Visa Details and Contract Details.

If your bank master is enabled for E-payments , you can choose any of the e payments options (e-fund transfer ,e-cheque ) during voucher creation of payroll payments.

In Statutory Details , you must enter the Income Tax Number (PAN) , Aadhaar Number , Universal Account Number (UAN) , EPS Account Number, PF Account Number and ESI Number . This information is required for printing Employee Count (No. of Employees) in the PF & ESI Challans and other Statutory Reports.

To update the Permanent Retirement Account Number (PRAN) of the employees covered under the National Pension Scheme (NPS), enable the Applicable for NPS? option and specify the PRAN in the PR Account Number field.

Employee Configuration

1. Click F12: Configure to change the default display for the Employee Creation screen.

2. Set the option Provide aliases along with name? to Yes to add aliases for the employee.

3. Set the option Provide language aliases for name? to Yes to add the aliases in other languages as selected (only while using Multilingual feature)

4. Set the option Add notes for employees? to Yes to add notes or remarks for an employee.

5. Set the option Show statutory details? to Yes to enter the PAN, PF, PR, EPS Account Number, the Date of Joining and Relieving.

6. Set the option Provide passport and visa details? to Yes to enter the passport and visa details of the employee.

7. Set the option Provide contract details? to Yes , to enter contract details such as Work Permit Number, Contract Start Date and End Date.

8. Set the option Show employee display name? to Yes , to print a different name for an employee while printing reports. This option is useful the same name is shared by a number of employees.

9. Press Ctrl +A to accept.

11. Press Enter to save.

In this way we can create employees . Also multiple employees can be created at once but it is suggested to create one employee at a time so that all other details of employee can be entered in tally which is very useful in long term .

Creating Employee Groups (Payroll)

Employee Group is very useful as it helps to classify employee such as their job function, department, location, cadre/designation, and so on. one can also define salary structures at the Employee Group level to apply a common salary structure for an entire department such as Marketing, R&D, Sales, and Accounts.

Creating a Single Employee Group

1. Go to Gateway of Tally > Payroll Info. > Employee Groups > Create (under Single Group ).

2. Select the Employee Category from the List of Categories .

3. Enter the Name of the Employee group.

4. Select the group under which the employee group is to be added.

5. Set the option Define Salary Details to Yes . if you want to create common salary structure for entire department

6. Press Enter to view the Salary Details Creation screen.

7. Specify the salary details applicable to the employee group in this screen. (for salary structure kindly refer to PAY HEAD chapter) The Salary Details Creation screen appears as shown below:

8. Press Enter to navigate to the Employee Group Creation screen.

9. Press Enter to save.

Employee Group Configuration

1. Press F12 to add/remove options in the Employees Group Creation screen.

2. Set the option Allow ALIASES along with the Names to Yes to add aliases for names of employee groups.

3. Set the option Allow Language ALIASES along with Names to Yes t o add aliases in other languages (if Multilingual feature is enabled).

4. Press Ctrl +A to accept.

Creating Employee Categories

While an Employee group is available by default, an Employee Category provides an additional level of employee classification. An employee category can be used to track the salaries paid to employees working in specific projects or locations such as Head Office and Regional Offices.

Employee categories option is available only if the option maintain more than one payroll or cost category is enabled in F11:Accounting Features.

Creating a Employee Category

1. Go to Gateway of Tally > Payroll Info. > Employee Categories > Create (under Single Category ).

2. Specify the name of the category to be added, in the Name field.

3. Set the option Allocate Revenue Items to Yes to allocate revenue related transaction values for employees created under this category.

4. Set the option Allocate Non-Revenue Items option to Yes to allocate non-revenue related transaction values for employees created under this category.

5. Press Enter to save the employee category.

Employee Category Configuration

1. Press F12 to add/remove options in the Employees Category Creation screen.

2. Set the option Allow ALIASES along with the Names to Yes to add the alias names.

3. Set the option Allow Language ALIASES along with Names to Yes to add the names in other languages as selected (only while using Multilingual feature).

4. Set the option Allow ADVANCED entries in Masters to No to hide the options Allocate Revenue Items and Non Revenue Items in the Employee Category Creation screen.

5. Press Ctrl + A to accept the changes.

Payroll Unit

A payroll Unit is similar to a unit measure used in the Inventory module. Tally ERP 9 uses payroll units to calculate pay components for a given period. You can create Simple and Compound payroll units depends, measured on attendance/production types such as Time , Work , or Quantity .

Creating a Simple Payroll Unit

1. Go to Gateway of Tally > Payroll Info. > Units (Work).

2. Select Type as Simple.

3. Enter the Symbol for the Unit.

4. Enter the Formal Name.

5. Provide the Number of Decimal Places , as applicable.

6. Press Enter to save.

Similarly, you can create the other payroll units such as Minutes , Hours , and Pieces .

Creating a Compound Payroll Unit

In a Compound payroll unit you can combine two payroll units. For example, a box of 10 Nos, a dozen of 12 Pcs, and an hour of 60 mins.

1. Go to Gateway of Tally > Payroll Info. > Units (Work) .

2. Select Compound in the field Type , and press Enter. In t he Conversion field you can create the compound payroll unit.

3. Select the First Unit from the Units list. In this example, Hrs is the First Unit .

4. Specify the conversion factor in the Conversion field. In this example, the conversion factor is 60.

5. Specify the Second Unit from the Units list. In this example, Mins is the Second Unit .

6. Press Enter to save the compound payroll unit creation screen.

In this way payroll units are created .

Attendance or Production Types

Attendance/Production Type are used to compute salary/wages payable to employee based on present/absent at work or performance . Attendance/production types are dependent on the Pay Heads that constitute employees pay structure, and so you may need to define multiple types.

One can also create based on work production unit such as piece productions ,sales performance and so on.

You can also define Attendance/Production Types in hierarchical group to ensure that attendance types having a common unit are combined under logical groups. For example, The group Present Days can have Present and Leave with Pay as sub-groups which helps to differentiate in two different units with same function.

Creating Attendance Type (Payroll)

Following are the attendance type which must be created

NAME	Under	Attendance/Production type	Period type
Present	Primary	Attendance/leave with pay	Days
Absent	Primary	Leave without Pay	Days
Overtime	Primary	Production	Hrs of 60 mins

Create positive attendance type

1. Go to Gateway of Tally > Payroll Info. > Attendance/Production Types > Create .

2. Enter the Name of the attendance type.

3. Select Primary from the list for the field Under.

4. Select the Attendance type as Attendance/Leave with Pay. The Period type appears automatically.

5. Press Enter to save.

You can create the Attendance Type Absent as Leave without Pay for recording negative attendance in the same manner.

Similarly absent and overtime must be created .

User Defined Calendar Types (Payroll)

You can use the User Defined Calendar Type to compute the per day salary based on the variable days for each month based on Pay Heads such as Basic Pay. For example , 25 days in January, 24 days in February, 26 days in March, and so on.

One must configure the value for the number of days in each month (period) before recording the attendance details using an Attendance Voucher .

1. Go to Gateway of Tally > Payroll Info. > Attendance/Production Types > Create .

2. Specify the required Name for Attendance Type .

3. Select Primary in the Under field.

4. Select User Defined Calendar Type in the Attendance Type field.

5. Press Enter to save.

Creating Pay Heads (Payroll)

Pay heads are salary components constituting an employee's pay structure. A pay head is always a benefit may be a addition or a deduction from the salary. The value of these pay heads could be fixed or variable for each payroll period.

For example, Basic Pay is a fixed pay component, whereas Variable Pay and Bonus are variable components.

A Pay Head Type is categorised as Earnings , Deductions or Reimbursements .

Earning pay head may accrue as fixed or based on performance.

Pay Head name	Pay head type	Under	Affect net salary	Name to appear in pay slip	Use for gratuity	Calculation Type	Calculation period/production period
Basic pay	Earnings for employee	Indirect expenses	Yes	Basic	Yes	On Attendance	Months
House rent allowance	Earnings for employee	Indirect expenses	Yes	HRA	No	As computed value	-
Conveyance allowance	Earnings for employee	Indirect expenses	Yes	Conveyance	No	Flat rate	Months
Overtime pay	Earnings for employee	Indirect expenses	Yes	Overtime	No	On production	Overtime
Variable Pay	Earnings for employee	Indirect expenses	Yes	Variable pay	No	As user defined value	-

Creating Earnings Pay Head with Calculation Type as Attendance (Payroll)

Tally ERP 9 allows you to create pay heads that calculate earnings based on attendance and attendance type.

1. Go to Gateway of Tally > Payroll Info. > Pay Heads > Create .

The Pay Head Creation screen appears, as shown below:

2. Enter the pay head name in the Name field.

3. Select Earnings for Employees f rom the List of Pay Head Types , in the Pay head type field.

4. Select Income type for the pay head as:

o Fixed: This forms a part of the employee’s Total Gross Salary . For example , Basic Pay.

o Variable: This forms a part of the employee’s Total Earnings only. For example , Overtime Wages.

5. Select Indirect Expenses from the List of Groups in the Under field.

6. Set Affect Net Salary to Yes , if you want the pay head to affect the net salary.

The Name to appear in Payslip field displays the pay head Name by default. You can change the name, if required.

7. Set Use for calculation of gratuity to Yes , to consider this pay head for Gratuity calculation.

8. Set the option Set / Alter Income Tax Details to Yes to view the Income Tax Details screen.

9. Select the required tax component ( for example , Basic Pay) in the Income Tax Component field.

10. Select On Projection as the Tax Calculation Basis , if tax computation is spread across the remaining period.

11. Set the option Deduct TDS across Period(s) to Yes when Tax Calculation Basis is On Projection. It can be set to Yes or No for On Actuals, as required.

Note: when on projection is the tax calculation basis , the system projects the income component for the remaining period . when the option Deduct tds across period is set to yes , the TDS amount deducted is spread across the remaining period and deducted every month.

12. Select On Attendance as the Calculation type .

13. Select the required method of recording attendance.

14. To deduct salary for the number of days an employee is absent (Leave without Pay),

o Select Not Applicable for Attendance/leave with pay field.

o Select Absent in the field Leave without pay field.

EXPLANATION: there are two methods for calculation type in Attendance

1.present days under this type present days are recorded and absent days not necessarily to be recorded . in short salary is paid on present day basis and absent days is not considered for calculation

2.Absent days under this type absent days are recorded and while calculating salary absent days are considered and based on remaining present days salary is paid. Only one method can be selected either present days or absent days.

15. Select Present in the Attendance/leave with pay field the Present Attendance Type and follow the remaining steps.

16. Select the required Calculation period from the List of Calculation Periods .

17. Based on the Calculation period , you can select and enter the details for Per Day Calculation Basis as User Defined or Calendar period or User Defined Calendar Type.

18. Select the Rounding Method , if applicable.

19. Enter the desired rounding limit.

20. Press Enter to save

AS you may have noticed there are various options in pay head type and calculation types now lets understand these 1^st before implementing them.

Options in pay head type

There are various options. From employee point of view pay head type can be either earnings ,deduction or statutory deductions . for earnings are classified in earnings for employee. For professional tax are classified in Deductions from employee. For bonus classified in bonus, for relevant statutory deductions relevant pay head type is given. For expenses to be reimbursement form employer are classified in Reimbursements to employees.

For gratuity there is gratuity, for loans there is loans and advances, for tax on perquisites tax paid by employer on perquisites.

Options in calculation type

On attendance for calculation based on present and absent

Flat rate for flat accrual irrespective of attendance

As user defined value for amount as user want to define

As computed value for slab based valuation

On production for incentive/ performance based calculation

Following is example of production based pay head

Creating Earnings Pay Head with Calculation Type as On Production (Payroll)

You can create Earnings Pay Heads by setting On Production for Calculation Type .

1. Go to Gateway of Tally > Payroll Info. > Pay Heads > Create. The Pay Head Creation screen appears as shown below

2. Enter Pay Head name in the Name field.

3. Select Earnings for Employees as the Pay head type from the list of Pay head type .

4. Select the Income type for the Pay Head as one of the following types:

o Fixed : This forms a part of the employee’s Total Gross Salary . For example , Basic Pay.

o Variable : This forms a part of the employee’s Total Earnings only. For example , Overtime Wages.

5. Select Indirect Expenses from the List of Groups in the Under field.

6. By default, Affect Net Salary is set to Yes . Set this option to No , if you do not want this component to be included in the pay slip.

7. By default, the pay head component name entered in the Name field appears in the pay slip. Enter the Name to appear in Payslip if you want to change the default pay head component name.

8. By default, Use for calculation of gratuity is set to No . If you want this pay head to be considered for Gratuity calculation, set this option to Yes .

9. In the Income Tax Details screen,

o Select Other Earnings/Allowances (Fully Taxable) as the Income Tax Component

o Select On Actual Value as Tax Calculation Basis, if the amounts applicable to this pay head vary each month, to rationalise and spread tax across the remaining period. If the amounts are fixed, select On Projected Value .

o Set Deduct TDS across Period(s) to Yes to deduct tax across the remaining period. If this is set to No , the entire tax is deducted in the same month.

10. Select On Production as the Calculation type from the List of Calculation . The field Production type appears.

11. Select the appropriate production type from the List of Production Types .

12. Select the required rounding method from the Rounding Methods list, and enter the required rounding limit in the Limit field.

14. Press Enter to accept.

Similarly, you can create pay heads for Piece Rate or Box Production .

Overtime pay is classified under direct expenses because this expense is directly identifiable with product cost .

Creating Pay head (earning for employee) with calculation type AS Computed value

Pay head such as House rent allowance is calculated based on certain formula . As per 7^th pay commission for population between 5lakh to 50 lakh 20%. So fill details as given in below image

In calculation type select On current earning total.

Select slab type as percentage , value Basis as 40%.

Press ctrl+A.

As u saw above in compute various option are there . one can also pay a pay head on specific formula ,based slab ,percentage of specific pay head as well .

For example specific formula = 20%of basic + DA …

In short tally allows to number of option in calculation .

In similar manner pay head with flat rate can be made as follows

In Calculation Type select flat rate.

Press ctrl + A to Accept.

Creating Employee Deductions Pay Head (Payroll)

Pay head name	Pay head type	Statutory pay type	Under	Affect net salary	Name to appear in pay slip	Calculation type	Computation method
Employees PF contribution @ 12%	Employees statutory deduction	PF Account (no 1 )	Current liabilities	Yes	epf@12%	As computed value	On specific formula
Employees ESI contribution @1.75%	Employees statutory deduction	Employee state insurance	Current liabilities	Yes	ESi@1.75%	On specified formula	Basic pay + HRA+ conveyance + overtime
Professional Tax	Employees statutory deduction	Professional tax	Current liabilities	Yes	Profession Tax	As computed value	On current Earning total

Creating a Canteen Deduction Pay Head (Payroll)

You can create a Canteen Deduction Pay Head by selecting Deductions from Employees as the Pay head type during pay head creation.

1. Go to Gateway of Tally > Payroll Info. > Pay Heads > Create .

2. Enter the pay head name in the Name field.

3. Select Deductions from Employees as the Pay head type from the List of Pay Head Types.

4. Select Current Assets from the List of Groups in the Under field.

o By default, Affect Net Salary is set to Yes . Set this to No if you do not want this component to be included in the Pay Slip.

o By default, the pay head component name entered in the Name field appears in the pay slip.

5. Enter the Name to appear in Payslip if you want to change the default pay head component name.

6. Select As User Defined Value as the Calculation type from the List of Calculation .

7. Press Enter to save the changes.

Creating Salary Advance Deduction Pay Head (Payroll)

In Tally ERP 9, you can create pay heads to account for deduct loans given to an employee from their salary.

1. Go to Gateway of Tally > Payroll Info. > Pay Heads > Create.

2. Enter pay head name in the Name field.

3. Select Loans and Advances as the Pay head type from the list of Pay head type.

4. Select Loans and Advances (Assets) from the List of Groups , in the Under field.

By default, Affect Net Salary is set to Yes . Type No , if you want to exclude this component from the pay slip.

By default, the Pay Head component name entered in the Name field appears in the Pay Slip. If you want to change this, enter the appropriate name in the Name to appear in Payslip field.

5. Set As User Defined Value as the Calculation type , from the List of Calculation.

6. Press Enter to accept.

Note: You may need to recover from the employee's salary, the interest towards the loan/advance given. In such cases, you can use the interest calculation feature to calculate the EMI for each month, and set the Calculation Type as Flat Rate to recover the amount.

Creating Pay Head for Income Tax Deduction (Payroll)

In Tally erp 9, you can create a pay head to account for income tax deductions.

1. Go to Gateway of Tally > Payroll Info. > Pay Heads > Create .

2. Enter the pay head name in the Name field.

3. Select Employees' Statutory Deduction as the Pay Head Type , from the List of Pay Head Types .

4. Select Statutory Pay Typ e as Income Tax.

5. Select Current Liabilities from the List of Groups in the Under field.

6. By default, Affect Net Salary is set to Yes.

7. By default, the pay head component name entered in the Name field appears in the pay slip. Enter the Name to appear in Payslip if you want to change the default pay head component name.

8. The Calculation type is set to As per Income Tax Slab , by default .

9. Select the appropriate Calculation period from the List of Calculation Periods .

Note: To process salary weekly, fortnightly or daily along with TDS, select the day wise option as Calculation Period .

10. Press Enter to accept.

Note: Currently, you need to calculate the Income Tax Amount for the employees separately, and enter the same while processing the payroll voucher.

Creating Statutory Deductions Pay Heads for Employees (Payroll)

Creating PF Deduction Pay Head for Employees (Payroll)

In Tally erp 9, you can create a pay head to account for PF deduction for employees.

1. Go to Gateway of Tally > Payroll Info. > Pay Heads > Create .

2. Enter the name of the Pay Head in the Name field.

3. Select Employees' Statutory Deductions as the Pay Head Type from the list of Pay Head Types.

4. Select PF Account (A/c No. 1) in the Statutory Pay Type field.

5. Select Current Liabilities from the List of Groups in the Under field.

6. By default, Affect Net Salary is set to Yes . Type No, if you do not want this component to be included in the pay slip.

7. By default, the pay head component name entered in the Name field appears in the pay slip. Enter the Name to appear in Payslip if you want to change the default pay head component name.

8. By default, the Calculation Type field is set to As Computed Value , and the Calculation Period field is set to Months .

9. Select Normal Rounding from the list of Rounding Methods , and type 1 as the rounding Limit.

10. Select On Specified Formula , from the Computation On list, in the Compute field. The Computation on Specified Formula sub-screen appears.

● In the Pay Head column, select Basic Pay from the List of Pay Heads and select End of List to return to Pay Head Creation .

11. Enter the desired date in the field Effective Date field, when the PF deduction begins.

12. Select Percentage from the List of Slabs in the Slab Type field.

13. Enter the required percentage for PF in the Value Basis field.

14. Press Enter to accept.

Similarly, you can create pay head for Voluntary Provident Fund Deduction.

Creating ESI Deduction Pay Head for Employees (Payroll)

Any income such as Basic Pay, Dearness Allowance, House Rent Allowance, Conveyance, and Overtime are considered for ESI calculation.

Note: ESI monthly wage threshold is increased from Rs. 15,000/- to Rs. 21,000/- effective from 1st Jan 2017.

1. Go to Gateway of Tally > Payroll Info. > Pay Heads > Create.

2. Enter the name of the Pay Head in the Name field.

3. Select Employees' Statutory Deductions as the Pay head type from the List of Pay Head Types.

4. Select Employee State Insurance in the Statutory Pay Type field.

5. Select Current Liabilities from the List of Groups in the Under field.

6. By default, Affect net salary is set to Yes . Type No , if you do not want this component to be included in the pay slip.

7. By default, the pay head component name entered in the Name field appears in the pay slip. Enter the Name to appear in Payslip if you want to change the default pay head component name.

8. By default, the Calculation type field is set to As Computed Value , and the Calculation period field is set to Months.

9. Select Normal Rounding from the list of Rounding Methods and type 1 as the rounding Limit.

10. In the Compute field, select On Specified Formula from the Methods of computation list. The Compute sub-screen appears.

11. In the Pay Head column:

● Select Basic Pay from the List of Pay Heads.

● Select Add Pay Head to add each pay head that is used for ESI calculation.

● Select End of List to return to Pay Head Creation.

12. In the Effective Date field, enter the desired date when the ESI Deduction begins.

13. By default, the Slab Type field is set to Percentage.

14. Enter the percentage value in the Value Basis field.

15. Similarly, enter the From Amount , Amount Upto , Slab Type and Value details for the next slab.

Note: You cannot specify the amount while creating the Pay Head for ESI. The system retrieves the amount from the Statutory Master file.

16. Press Enter to accept.

Note: Add Basic Pay , HRA , Conveyance and Overtime before adding the ESI Deduction pay head in the Salary Details screen because the calculation for ESI is dependant on these pay heads.

Also, when multiple pay heads are added into the formula for calculation, ensure that the independent pay heads appear first, and the dependent pay heads, later. For example , HRA is dependant on Basic Pay and as a result, Basic Pay should appear first in the list, followed by HRA.

Creating Pay Head for Professional Tax Deduction - Employees (Payroll)

In Tally ERP 9, you can create a pay head to account for Professional Tax Deduction for employees.

1. Go to Gateway of Tally > Payroll Info. > Pay Heads > Create

2. Enter the name of the Pay Head in the Name field.

3. From the list of Pay head Types , select Employee’s Statutory Deductions as the Pay head type.

4. Select Professional Tax in the Statutory Pay Type field and enter the Professional Tax Registration Number in the adjacent field.

5. Select Current Liabilities from the List of Groups in the Under field.

6. By default, Affect net salary is set to Yes . If you do not want this component to be included in the pay slip, type No.

7. By default, the pay head component name entered in the Name field appears in the pay slip. Enter the Name to appear in Payslip if you want to change the default pay head component name.

8. By default, the Calculation type field is set to As Computed Value.

9. In the Calculation period field, select Month or Period to specify the frequency of PT deduction as monthly or based on a certain period respectively.

Note: Once the period is selected as Computation period , Professional Tax is available as a separate process under Payroll Auto Fill. You can compute Professional Tax for any specified period. For example, once in 6 months (in case of Tamil Nadu) using the Payroll Auto Fill by specifying the required period.

10. Select Normal Rounding from the list of Rounding Methods , and type 1 as the rounding Limit .

11. In the Compute field, select On Current Earnings Total from the Methods of computation list.

12. In the Effective Date field, enter the date from when Professional Tax will be effective.

13. Enter the required value in the From Amount and Amount Up to fields.

14. Select Value from the List of Slabs in the Slab Type field.

15. Enter the amount for Professional Tax for each slab in the Value field.

16. Press Enter to accept.

Note: While defining Salary Detail, if you use any Pay Head component that has Calculation Type As Computed Value and Compute: On Current Earnings Total, you must select such a component before choosing any Deduction or Contribution Pay Heads.

Employees' NPS Deduction - Tier I

1. Go to Gateway of Tally > Payroll Info. > Pay Heads > Create .

2. Enter the name of the Pay Head in the Name field.

3. Select Employees' Statutory Deductions as the Pay head type from the List of Pay Head Types.

4. Select National Pension Scheme (Tier - I) in the Statutory Pay Type field.

5. Select Current Liabilities from the List of Groups in the Under field.

6. By default, Affect net salary is set to Yes . Type No , to exclude this component from the pay slip.

7. By default, the pay head component name entered in the Name field appears in the pay slip. Enter the Name to appear in Payslip if you want to change the default pay head component name.

8. Select the required Calculation type as user defined value , Flat Rate or As computed value.

9. Select Normal Rounding from the list of Rounding Methods , and type 1 as the rounding Limit.

10. If the Calculation type is As Computed Value , in the Compute field, select On Specified Formula from the Methods of Computation list. The Compute sub-screen appears.

● Select Basic Pay in the Pay Head column, from the List of Pay Heads.

● Alternatively, select Add Pay Head from Additional Computations for table to add other pay heads.

● Select End of List to return to Pay Head Creation.

11. In the Effective Date field, enter the desired date from when NPS will be effective.

12. Select Percentage from the List of Slabs , in the Slab Type field.

13. Enter the required percentage for NPS in the Value Basis field.

Note: You can set the Calculation Type to As Computed Value/Flat Rate/User Defined. If you select User Defined as the Calculation Type, you must select the same in the Process For field of the Payroll Auto Fill sub-screen while recording a payroll voucher.

14. Press Enter to accept.

Employees' NPS Deduction - Tier II

For Employees' NPS Deduction - Tier II pay head creation, set Nati onal Pension Scheme (Tier II) as the Statutory Pay Type . All other steps are the same as used for Employees' NPS Deduction - Tier I.

The completed Pay Head Creation screen appears as shown below:

Note: You can set the Calculation Type to As Computed Value/Flat Rate/User Defined . If you select User Defined as the Calculation Type , you must specify the same in the Process For field of the Payroll Auto Fill sub-screen while recording a Payroll Voucher..

Creating NPS Contribution Pay Head for Employers (Payroll)

Any contribution by the employer towards NPS will fall under the Tier I account of the scheme. Such employer's contribution towards NPS will be allowed to the employee under Section 80CCD (2) of the Income Tax Act, 1961, to the extent of 10% of Basic Pay and Dearness Allowance (DA).

1. Go to Gateway of Tally > Payroll Info. > Pay Heads > Create.

2. Enter the name of the Pay Head in the Name field.

3. Select Employer’s Statutory Contributions as the Pay head type from the list of Pay head types.

4. Select National Pension Scheme (Tier - I) in the Statutory Pay Type field.

5. Select Indirect Expenses from the List of Groups in the Under field.

6. By default, Affect Net Salary is set to No . Type Yes , if you want this component to be included in the Pay Slip.

7. In the Calculation type field, select the required type of calculation, user defined value, Flat Rate or as computed value. On selection of Calculation type , the Calculation period is pre-filled with Months by default.

8. Select Normal Rounding from the list of Rounding Methods and type 1 as the rounding Limit

9. If the Calculation Type is set to As Computed Value , then

10. In the Compute field, select On Specified Formula from the Computation On list. The Compute sub-screen appears.

● Select Basic Pay from the List of Pay Heads , i n the Pay Head column.

● Select Add Pay Head to add other Pay Heads to be considered for NPS calculation.

● Select End of List to return to Pay Head Creation .

11. In the Effective Date field, enter the date from when the NPS deduction will be effective.

12. Select Percentage from the List of Slabs , in the Slab Type field.

13. Enter the required percentage for NPS in the Value field.

Note: The Calculation Type can be set to As Computed Value/Flat Rate/User Defined . If User Defined is selected as the Calculation Type , then while recording a payroll voucher, NPS Process has to be selected in the Process For field of the Payroll Auto Fill sub-screen.

14. Press Enter to accept.

Creating Pay Head for Income Tax Deduction (Payroll)

In Tally erp 9, you can create a pay head to account for income tax deductions.

1. Go to Gateway of Tally > Payroll Info. > Pay Heads > Create .

2. Enter the pay head name in the Name field.

3. Select Employees' Statutory Deduction as the Pay Head Type , from the List of Pay Head Types .

4. Select Statutory Pay Typ e as Income Tax.

5. Select Current Liabilities from the List of Groups in the Under field.

6. By default, Affect Net Salary is set to Yes.

7. By default, the pay head component name entered in the Name field appears in the pay slip. Enter the Name to appear in Payslip if you want to change the default pay head component name.

8. The Calculation type is set to As per Income Tax Slab , by default .

9. Select the appropriate Calculation period from the List of Calculation Periods .

Note: To process salary weekly, fortnightly or daily along with TDS, select the day wise option as Calculation Period .

10. Press Enter to accept.

Creating Statutory Contribution Pay Heads for Employers (Payroll)

Creating EPS Contribution Pay Head for Employers (Payroll)

In Tally erp 9, you can create a pay head to account for the employer’s contribution towards Employee Pension Scheme (EPS).

1. Go to Gateway of Tally > Payroll Info . > Pay Heads > Create.

2. Enter the name of the Pay Head in the Name field.

3. Select Employer’s Statutory Contributions as the Pay head type from the list of Pay head types.

4. Select EPS Account (A/c No. 10) in the Statutory Pay Type field.

5. Select Indirect Expenses from the List of Groups in the Under field.

6. By default, Affect net salary is set to No. Type Yes, if you want this component to be included in the pay slip.

7. By default, the Calculation type field is set to As Computed Value, and the Calculation teriod is set to Months.

8. Select Normal Rounding from the list of Rounding Methods, and type 1 as the rounding Limit.

9. Select On Specified Formula, in the Compute field, from the Methods of computation list. The Compute sub-screen appears.

● Select Basic Pay , i n the Pay Head column, from the List of Pay Heads .

10. In the Effective Date field, enter the date from when the EPS deduction will be effective.

11. Enter the appropriate values in the From Amount and Amount Up to fields.

12. Select Slab Types from the List of Slabs , in the Slab Type.

13. Enter the percentage in the Value field.

14. Similarly, enter the From Amount , Amount Up to , Slab Type and Value details for the next slab.

15. Press Enter to accept.

Creating EPF Contribution Pay Head (Payroll)

In Tally erp 9, you can create a pay head to account for the employer’s contribution towards Employee Provident Fund (EPF).

1. Go to Gateway of Tally > Payroll Info . > Pay Heads > Create .

2. Enter pay head name in the Name field

3. Select Employer’s Statutory Contributions as the Pay Head Type from the list of Pay Head Types

4. Select PF Account (A/c No. 1) in the Statutory Pay Type field.

5. Select Indirect Expenses from the List of Groups , in the Under field.

6. By default, Affect Net Salary is set to No . Type Yes , to include this component in the pay slip.

7. The Calculation Type is set to As Computed Value , and Calculation Period is set as Months , by default.

8. Select Normal Rounding from the list of Rounding Methods , and type 1 as the rounding Limit .

9. In the Compute field, select On Specified Formula , from the Computation On list . The Compute sub-screen appears.

● Select Employee’s PF Deduction @ 12% from the List of Pay Heads , in the Pay Head column.

● Select Subtract Pay Head in the Function.

● Select End of List to return to Pay Head Creation .

10. In the Effective Date field, enter the date from when the EPF will be effective.

11. Select Slab Types from the List of Slabs , in the Slab Type .

12. Enter the percentage in the Value Basis field.

13. Press Enter to accept.

Creating ESI Contribution Pay Head for Employers (Payroll)

In Tally erp 9, you can create a pay head to account for the employer’s contribution towards ESI.

1. Go to Gateway of Tally > Payroll Info. > Pay Heads > Create .

2. Enter the name of the Pay Head in the Name field.

3. Select Employer’s Statutory Contributions as the Pay Head Type , from the list of Pay Head Types .

4. Select Employee State Insurance in the Statutory Pay Type field .

5. Select Indirect Expenses from the List of Groups , in the Under field.

6. By default, Affect Net Salary is set to No . Type Yes , if you to include this component in the pay slip.

7. The Calculation Type is set to As Computed Value , and Calculation Period is set as Months , by default.

8. Select Normal Rounding from the list of Rounding Methods , and type 1 as the rounding Limit .

9. In the Compute field, select On Specified Formula , from the Computation On list . The Compute sub-screen appears.

● Select Add Pay Head from the List of Pay Heads to add pay head to be considered for ESI calculation.

● Select End of List to return to Pay Head Creation .

10. In the Effective Date field, enter the date from when the ESI Deduction will be effective.

11. Enter the percentage in the Value Basis field.

Note: The amount is not specified in the Pay Head creation screen for ESI as the same will be taken from the Satutory Master file.

12. Press Enter to accept.

Note: ESI Contribution Pay Head should be added in salary details after Basic, HRA, Conveyance and Overtime, and Employee Deductions pay heads.

Creating NPS Contribution Pay Head for Employers (Payroll)

1. Go to Gateway of Tally > Payroll Info. > Pay Heads > Create.

2. Enter the name of the Pay Head in the Name field.

3. Select Employer’s Statutory Contributions as the Pay head type from the list of Pay head types.

4. Select National Pension Scheme (Tier - I) in the Statutory Pay Type field.

5. Select Indirect Expenses from the List of Groups in the Under field.

6. By default, Affect Net Salary is set to No . Type Yes , if you want this component to be included in the Pay Slip.

7. In the Calculation type field, select the required type of calculation,user defined value , Flat Rate or AS computed value. On selection of Calculation type , the Calculation period is pre-filled with Months by default.