As per the Income Tax Act, while computing the Taxable Income the following are deducted from the Gross Salary for the Employees.
Exemptions: As per section 10, Allowances such as HRA, LTA, Transport Allowance, Children Education Allowance and Children Hostel Expenditure Allowance are exempted from Income Tax.
Deductions Under Chapter VI-A: As per Chapter VI-A of Income Tax, the following Deductions are allowed while computing the taxable income:
Investments (U/s 80C, 80CCF, 80CCG, etc.): Subject to a ceiling. certain investments are allowed as deduction when the system computes Taxable Income.
Others (U/s 80D, 80DD, 80E, etc.): Certain other expenses such as Mediclaim, and Interest paid on higher education loan are deducted before arriving at the taxable income.
The employee can provide the Exemption and Deduction details to the employer, and these details can be entered in the system as employee Declaration by following the process given below:
Go to Gateway of Tally > Payroll Info. > Income Tax Details > Declarations
You can select the required exemption and investments, and enter the employee declarations details.
From the Income Tax Declaration screen, select House Rent Allowance, and press Enter.
Select the required Employees or All Employees or an Employee Group
In the House Rent Declaration screen:
In the Effective From field, specify the date from when rent payment commenced.
In Rent Declared Amount field, specify the amount the employee has declared as rent.
In Rent Proof Amount field, specify the amount associated with the proof of rent paid the employee has submitted.
In Place of Residence, select Metro or Non-Metro based on the city.
Note: Metro should be selected for Delhi, Mumbai, Kolkata and Chennai. For all others cities, Non-Metro should be selected.
Press Enter to save.
Similarly, the HRA details can be entered for an individual (one employee).
From Income Tax Declaration screen, bring cursor on Leave Travel Assistance and press Enter.
Select the required Employee
In the Leave Travel Assistance screen
In the Effective From field, specify the date when the LTA becomes applicable.
In the Ledger Name field, select the Leave Travel Assistance ledger.
By default, the Override for field is set to Exempt.
In the Exemption Amount field, specify the LTA amount that is exempted from Income Tax.
Press Enter to save.
From Income Tax Declaration screen, select Transport Allowance and press Enter.
Select the required Employees or All Employees, or an Employee Group.
In the Transport Allowance screen
In the Effective From field, specify the date from when the Transport Allowance becomes applicable.
Select the Employee Status as Physically Challenged or Others
Note: Employee Status will be used for Transport Allowance exemption limit.
Press Enter to save.
From Income Tax Declaration screen, select Children Education Allowance and press Enter.
Select the required Employees or All Employees or an Employee Group.
In the Children Education Allowance screen,
In the Effective From field, specify the date from when the Children Education Allowance becomes applicable.
In the Number of Children field, enter the number of children each employee wants to cover under this declaration. You can enter a value of 1 or 2 in this field.
Press Enter to save.
From Income Tax Declaration screen, select Children Hostel Expenditure Allowance and press Enter.
Select the required Employees or All Employees, or an Employee Group.
In the Children Hostel Expenditure Allowance screen
In the Effective From field, specify the date from when the Children Hostel Expenditure Allowance becomes applicable.
In the Number of Children field, enter the number of children that the employee wants to cover in this declaration. You can enter a value of 1 or 2 in this field.
Press Enter to save.
Under this head, you can define employee(s) declarations and proofs/eligible amount for the other incomes such as House Property, other sources and Interest on housing Loan, if the premises is self occupied.
Select Income Declared by Employees - Single Employee Multi Component, and press Enter.
From the List of Employees, select the required employee.
Select the Particulars of Income Other than Salary - Income from House Property from the List of Other Income.
Specify the Effective From date.
Specify the Details of Income from House Property. The system computes the income from house property based on the information provided.
Similarly, you can select the other incomes to be declared.
Press Enter to save.
Select Income Declared by Employees - Multi Employees Single Component, and press Enter.
From the List of Employees, select the appropriate Employee Group .
Select the Type of Income from the List of Incomes.
Specify the Effective From date.
In Annual Amount column, specify the Declare and Proof amount. The system will then display the qualifying amount.
Press Enter to save
From Income Tax Declaration screen, select Single Employee Multi Component under Investments (U/s 80C, 80CCF etc.) and press Enter.
From the List of Employees, select the employee, and press Enter.
In the Investment Declaration screen:
Under Particulars of Investments, select the required Investments from the List of Investments
In the Effective From field, specify the date when these investments become applicable.
In the Declared Amount field, specify the amount declared for the respective investment.
In the Proof/Eligible Amount field, specify the details of the amount associated with the proof submitted by the employee.
Press Enter to save.
From Income Tax Declaration screen, select Multi Employees Single Component under Investments (U/s 80C, 80CCF etc.) and press Enter.
Select the All Items from the List of Employees, and press Enter.
Select the required Investment from the List of Investments press Enter.
In the Investment Declaration screen:
In the Effective From field, specify the date when these investments become applicable.
In the Declared Amount field, specify the amount declared for the selected investment.
In the Proof/Eligible Amount field, specify the details of the amount associated with the proof submitted by the employees.
Press Enter to save
From Income Tax Declaration screen, select Single Employee Multi Component under Others (U/s 80D, 80DD, 80E etc.) and press Enter.
From the List of Employees, select the appropriate employee, and press Enter
In the Chapter VIA Others Declaration screen:
Under Particulars of Deduction, select the required Deduction from the List of Investments
In the Effective From field, specify the date when the deductions are applicable.
In the Condition field, select the appropriate value from the list (such as Others, Senior Citizen or Severe Disability) based on the information provided.
In the Declared Amount field, specify the amount declared for the respective investment.
In the Proof/Eligible Amount field, specify the details of the amount associated with the proof submitted by the employee.
The Qualifying Amount field displays the actual amount which is allowed as deduction from actual salary.
Note: For Mediclaim Insurance taken for dependant parents in addition to self, the maximum Qualifying Amount is Rs. 40,000 [Self (if Senior Citizen) Rs.20000 + Parents (Senior Citizens) Rs. 20000).
Press Enter to save.
From Income Tax Declaration screen, bring cursor on Multi Employees Single Component under Others (U/s 80D, 80DD, 80E etc.) and press Enter.
Select the All Items from the List of Employees, and press Enter.
Select the required Investment from the List of Investments, and press Enter.
In the Chapter VIA - Others screen:
In the Effective From field. specify the date when these investments become applicable.
In the Condition field, select the appropriate parameter from the list (such as Others, Senior Citizen or Severe Disability), based on the information provided.
In the Declared Amount field, specify the amount declared for the selected investment.
In the Proof/Eligible Amount field, specify the details of the amount associated with the proof submitted by the employees.
Press Enter to save.