WHAT IS INDIAN PAYROLL PROCESS?

Posted on 25th Jul 2018 | 4682 views

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Indian Payroll Process PDF

Indian pay roll process is done according to the provisions under the 7th Pay commission first let’s understand what is pay roll and its components

Pay roll calculation

Payroll is defined as a method of managing the salaries of employees in organizations. The process involves calculating employee salaries and tax deductions, administering pension benefits and disbursing salaries to employees. It can be called as an account activity that carries out the administration of the salaries of the employees of the organization.

Payroll is the salary processing system.

Payroll is divided into two parts-Monthly and Annual

Monthly payroll includes the following:

Basic salary

Dearness Allowance

HRA

Conveyance/Petrol

Medical

Education

Telephone

Special allowance

Other Perks

Deductions

Pay roll in India adminstering acts

Indian Factories Act 1948

Shops and Commercial Establishments Act 1961

Beedi and Cigar Workers (Condition of Employment) Act 1966.

Plantation Labor Act 1951

Mortar Transport Workers Act 1961

Building & Other Construction

Workers (Regulation of Employment and Conditions of Service) Act 1996

Inter-State-Migrant Workers (Regulation of Employment & Conditions of Service) Act 1979

Mines Act

Contract Labor (A & R) Act

EPF & MP Act

ESI Act

Indian pay roll process

In India Payroll generation depends totally on number of days in month. Say Feb (28 days). Total salary package will be paid accordingly, but while deducting a LWP it would be calculated on basis of 28 days.

Thus it’s irrespective of any number of holidays etc.

The Industrial Employment (Standing Orders) Act, 1946 (Ref. model Standing Order) the salary should be calculated on 30days for Monthly rated employee and 26days for daily rated employee, to maintain the constant PF deductions & LOP of an employee

As per government norms 26 days are calculated for salary in every month, there is no partiality to the workers like skilled or semi skilled or clerical job the role applicable to all, but some of the private concerns follow 30 or 31 days for their own benefit. 26 days are consider salary calculation period. It is 30 days irrespective of the Sundays and holidays for monthly wages and 26 days for daily wages.

Pay roll calculation

Ideal components for calculation of pay roll

Basic Pay: base component of salary

House Rent Allowance (HRA): supports housing expenses

Conveyance Allowance: supports daily transportation expenses

Child Education Allowance: supports school expenses for childrennbsp;

Special Allowance: covers miscellaneous expenses related to office duties (academic research, tours, uniform, etc.)

Other allowances

Payroll is calculated by adding allowances and excluding deduction

Gross Salary = (CTC) - (EPF) - Gratuity.

Taxable Income = Gross Salary - EPF) - HRA - LTA - Medical Insurance – Tax- transport allowances- other allowances

From above formulas

Take Home Salary = Gross Salary - Income Tax - Employee's PF Contribution (PF) - Professional Tax.

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