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Gratuity Pay Head (Payroll)

In TallyPrime, you can create pay heads for gratuity computation for India and the UAE.

 

Creating Gratuity Pay Head for India

  1. Gateway of Tally > Create > type or select Pay Head > and press Enter.
    Alternatively, press Alt+G (Go To) > Create Master > Pay Head > and press Enter.
  2. Enter the Name of the pay head.
  3. Select Gratuity from the List of Pay Head Types.
  4. Enter the Slab Rate details for Gratuity Calculation in the sub-screen:
  5. Select Provisions as Group from the List of Groups, in the field Under.
  6. Enable the option Set/Alter Income Tax Details. The Income Tax Details screen appears.
  7. By default, the Income Tax Component is set to Gratuity.
  8. By default, Tax Calculation Basis is set to On Actual Value because Gratuity is paid only when the employee leaves the organisation or retires.
  9. By default, Deduct TDS Across Period(s) is set to No because tax must be deducted in the same month. 
  10. Select the Rounding Method from the list if applicable.
  11. Accept the screen. As always, you can press Ctrl+A to save.

Note: To use the Earning Pay Head for Gratuity calculation, set the Use for Gratuity field to Yes in the Ledger Creation screen (for pay heads such as Basic Salary, and DA, which are classified as Indirect Expenses).

 

Creating Gratuity Pay Head for UAE

An employment contract in the United Arab Emirates (UAE) could be for a limited or an unlimited period.
According to the Federal Law of the UAE, an employee is entitled to receive gratuity after completion of one year of continuous service, irrespective of the contract type, which could be limited or unlimited.
TallyPrime now supports calculation of gratuity as per the  prescribed rules and regulations of the UAE.
To compute gratuity in a UAE Payroll enabled company, you must create two gratuity pay heads – one for a limited contract and another for unlimited contract employee. .

Note: Because an individual can be employed under either of the two contracts (limited & unlimited), use only one of these pay heads in the Salary Details of an employee.

 

Gratuity for the contract type – Limited

  1. Gateway of Tally > Create > type or select Pay Head > and press Enter.
    Alternatively, press Alt+G (Go To) > Create Master > Pay Head > and press Enter.
  2. Enter the Name of the pay head.
  3. Select Gratuity from the List of Pay Head Types.
  4. Enter the Slab Rate details for Gratuity Calculation in the sub-screen:
  5. Select Provisions/Current Liabilities as Group from the List of Groups, in the field Under.
  6. Select the Rounding Method from the list, if applicable.
  7. Accept the screen. As always, you can press Ctrl+A to save.

 

Gratuity for the contract type – Unlimited

  1. Gateway of Tally > Create > type or select Pay Head > and press Enter.
    Alternatively, press Alt+G (Go To) > Create Master > Pay Head > and press Enter.
  2. Enter the Name of the pay head.
  3. Select Gratuity from the List of Pay Head Types.
  4. Enter the Slab Rate details for Gratuity Calculation in the sub-screen:
  5. Select Provisions/Current Liabilities as Group from the List of Groups, in the field Under.
  6. Select the Rounding Method from the list, if applicable.
  7. Accept the screen. As always, you can press Ctrl+A to save.

Note: Ensure that the Employer Unique ID is entered in the F11 (Features) screen. After you add the gratuity pay head in the salary details of an employee, you can review the computation of gratuity using the Gratuity Summary report.

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