Creating Earnings Pay Head

Based on the Calculation Type and the Calculation period selected, the Earnings Pay heads can be further divided into the following main types:  

  • Attendance based Earnings Pay Head

  • Computation based Earnings Pay Head

  • Flat Rate based Earnings Pay Head

  • Production based Earnings Pay Head

  • User Defined Earnings Pay Head

    Creating Attendance based Earnings Pay Head

    To create an Attendance based Earnings Pay Head (e.g. Basic Pay),

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

    1. Enter the Pay Head name in the Name field.

    2. Select Earnings for Employees as the Pay Head Type from the List of Pay Head Types.

    3. Select the Income Type for the Pay Head

    The two Income Types are Fixed and Variable.

    • Pay Heads categorised under the Income Type – Fixed, form a part of the employee’s Total Gross Salary. For example: Basic Pay

    • Pay Heads categorised under the Income Type – Variable, form a part of the employee’s Total Earnings only. For example: Overtime Wages

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

    1. Set Affect Net Salary to Yes, if you want the Pay Head to affect the net salary.

    2. Name to appear in Payslip field is defaulted with the pay head Name entered. You can change the same, if required.

    3. Set Use for Gratuity to Yes, to consider this pay head for Gratuity calculation.

    4. Set the option  Set / Alter Income Tax Details to Yes

    5. In the Income Tax Details screen,

    • Select the required Tax component in the Income Tax Component field (e.g. Basic Pay)

    • In Tax Calculation Basis, select On Projection if tax computation has to be spread across the remaining period

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

    Note: Selecting Tax Calculation Basis as On Projection will project the income component for the remaining period, whereas if Deduct TDS across Period(s) is set to Yes, then the TDS amount  deducted will be spread across the remaining period and deducted every month.

    1. Select On Attendance in the Calculation Type from the List of Calculation drop down.

    1. If Attendance is selected as the required Calculation Type, select the required method of recording attendance.

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

      • Select Not Applicable for Attendance / Leave with Pay field

      • Select Absent in the field Leave without Pay field

    Note: You can select either one of the methods for Calculation Type for recording the Attendance. If Present  Days is selected then the option to select the Absent Attendance Type will not appear.

     For Present Attendance Type,

     Select Present in the Attendance / Leave with Pay field and follow the remaining steps.

    1. Select the required Calculation Period from the List of Calculation Periods.

    1. 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.

    2. Select the Rounding Method from the list if applicable.

    3. In the Limit field, enter the required Rounding Off Limit.

    1. Accept to save the Pay Head.