Introduction
Tax Exemptions are a key aspect of personal finance management in businesses. They refer to certain income, property, or transactions that are not subject to taxes. In the Empress HR system, employees can declare the amount of exemption they plan to claim from their taxable salary at the beginning of a payroll period.
This guide will guide you through the process of declaring tax exemption amounts in Empress HR, and how to manage this feature from a business perspective.
Why is Tax Exemption Important?
For employees, tax exemptions can significantly reduce the amount of tax payable, leading to higher take-home pay. For businesses, efficiently managing tax exemptions means ensuring accuracy in payroll processes, compliance with tax laws, and satisfaction among employees.
How to Set Up Tax Exemption in Empress HR
Before you start, make sure you have the following ready:
- An Employee Profile
- Defined Employee Tax Exemption Categories
- Defined Employee Tax Exemption Sub Categories
Steps to Create a New Employee Tax Exemption Declaration
- Choose Employee Tax Exemption Declaration from the menu, then select New.
- Select your desired Exemption Sub Category and Exemption Category.
- Enter the Maximum Exemption Amount and Declared Amount.
- Click on Save and then Submit.
The Total Exemption Amount will be deducted from the employee’s annual taxable income when calculating tax deductions in the Payroll.
Note: Employees can only submit one Employee Tax Exemption Declaration for each Payroll Period.
Main Features of Empress HR Tax Exemption
Define Tax Exemption Categories
Tax exemptions usually apply to certain categories as defined by the government or regulatory bodies. Empress HR lets you set up various categories that qualify for exemption.
To set up Tax Exemption Categories, go to: Employee Tax and Benefits > Employee Tax Exemption Category
Define Tax Exemption Sub-Categories
Under each category, there may be multiple items for which exemptions are allowed. For example, under category 80C (for India), sub-categories could include Life Insurance Premium.
To set up Tax Exemption Sub-Categories, go to: Employee Tax and Benefits > Employee Tax Exemption Sub-Category
Declare HRA Exemption (Specific to India)
For the current fiscal year in India, House Rent Allowance (HRA) exemption can be claimed. Empress HR calculates the eligible HRA exemption and applies it when calculating taxable income.
After your declaration is submitted, you can submit proof of your tax exemption by clicking on the Submit Proof button.
Note: The HRA component needs to be configured in the Company master under the HRA Settings sections for the HRA exemption to work properly.
Conclusion
The ability to declare and manage tax exemptions in Empress HR not only eases the payroll process but also ensures compliance with tax laws. This feature is a valuable tool for businesses striving for efficiency and transparency in their payroll management. For further assistance, please refer to our support resources or contact our support team.