Income Tax Classifications

Income tax classifications are statutory masters representing the various deductions, allowances, exemptions and perquisites introduced in various income tax bills. The classifications have the values that are either exempt or included for the purpose of calculating income tax. Each of these classifications are defined and governed by a section/sub-section under income tax bill.

In Tally.ERP 9 these masters are provided to help in configuring the income tax details of employees by applying the classifications where ever necessary.

The tax classification displays both basic information as well as the information related to applicability. The Income Tax Classification screen is only for display, you cannot make any changes to the details shown from here.

Go to Gateway of Tally > Display > Payroll Statutory Info. > Income Tax Classifications > Select any classification.

Name : Displays the name of the classification.

Previous Name : Displays the earlier name of the classification, if for any reason the name was changed after its introduction.

Applicable country : Displays the name of the country in which the classification is applicable. All payroll statutory masters are applicable only for India.

Section : Displays the section in the income tax bill under which the classification is defined and introduced.

Exemption section : Displays the section as per which the classification is declared as exempt from taxable income.

Deduction section : Displays the section as per which the classification is declared as deduction from taxable income.

Is exempted? Displays Yes or No based on the exemption status of the classification.

Category : Displays the category as Allowance, Deduction, Perquisite, Profit, Relief, Chapter VIA- Investment and so on, based on the income tax computation framework.

Tax Type : Displays the tax type. Most cases the classification is itself a tax type.

Income Tax Details

Applicable Tax Regime : Displays the tax regime, regular tax regime or tax regime u/s 115BAC, under which this classification is applicable.

Applicable For : Displays the type of individuals, any, male, female, senior citizen, physically disabled, and so on, to whom the classification is applicable.

Effective : Displays the date from which the classification is applicable.

Prorated : Displays where the classification is prorated or equally distributed.

Residential Percentage : Displays the percentage of salary up to which the rent is eligible for deduction.

Rent Paid Over Salary : Displays the percentage of amount paid as rent over the salary.

Number of Children : Displays the number of children for whom the classification is applicable.

Exemption (percentage) : Displays the exemption percentage of the classification.

Exempted Amount (Monthly) : Displays the monthly exemption amount.

Exempted Amount (Annual) : Displays the annual exemption amount.

Eligible Amount for Income Tax : Displays the amount on which income tax is payable.