How to Create Employee Statutory Deduction pay head in Tally for Payroll?

There is some statutory pay head deduction to maintain payroll compliance. It is Employees Provident Fund, Employees ESI, Professional Tax, Employees NPS Deduction, Income Tax Deduction pay head etc.

Employees’ PF Deduction Pay Head

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

Enter the name of the Pay Head in the Name field

1. Select Employees' Statutory Deductions as the Pay Head Type from the list of Pay Head Types
2. Select PF Account (A/c No. 1) in the Statutory Pay Type field
3. Select Current Liabilities from the List of Groups in the Under field
4. By default, Affect Net Salary is set to Yes. Type No, if you do not want this component to be included in the Pay Slip
5. By default, the Pay Head component name entered in the Name field will appear in the Pay Slip, if you want to change the default Pay Head component name then type it in Name to appear in Payslip field.
6. The Calculation Type field is pre-filled with As Computed Value and Calculation Period is pre-filled with Months by default
7. Select Normal Rounding from the list of Rounding Methods and type 1 as the rounding Limit
8. In the Compute field, select On Specified Formula from the Computation On list.
9. The Compute sub-screen appears, in the Pay Head column, select Basic Pay from the List of Pay Heads and select End of List to return to Pay Head Creation.
10. In the Effective Date field, enter the desired date from which the PF Deduction will come into effect
11. Select Percentage from the List of Slabs in the Slab Type field
12. Enter the required percentage for PF in the Value Basis field
13. Press Enter to Save.

Creating Employees' ESI Deduction Pay Head

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

1. Enter the name of the Pay Head in the Name field
2. Select Employees' Statutory Deductions as the Pay Head Type from the List of Pay Head Types
3. Select Employee State Insurance in the Statutory Pay Type field
4. Select Current Liabilities from the List of Groups in the Under field
5. By default, Affect Net Salary is set to Yes. Type No, if you do not want this component to be included in the Pay Slip
6. By default, the Pay Head component name entered in the Name field will appear in the Pay Slip, if you want to change the default Pay Head component name then type it in Name to appear in Payslip field
7. In the Calculation Type field is pre-filled with As Computed Value and Calculation Period is pre-filled with Months by default
8. Select Normal Rounding from the list of Rounding Methods and type 1 as the rounding Limit
9. In the Compute field, select On Specified Formula from the Computation On list
10. The Compute sub-screen appears, In the Pay Head column select Basic Pay from the List of Pay Heads and select Add Pay Head to add other Pay Heads that will be considered for ESI calculation one by one and select End of List to return to Pay Head Creation

Press Enter to Save.

Professional Tax Deduction Pay Head

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

1. Enter the name of the Pay Head in the Name field
2. Select Employee’s Statutory Deductions as the Pay Head Type from the list of Pay Head Types
3. Select Professional Tax in the Statutory Pay Type field
4. Enter the Professional Tax Registration Number in the new field that appears
5. Select Current Liabilities from the List of Groups in the Under field
6. By default, Affect Net Salary is set to Yes. Type No, if you do not want this component to be included in the Pay Slip
7. By default, the Pay Head component name entered in the Name field will appear in the Pay Slip, if you want to change the default Pay Head component name then type it in Name to appear in Payslip field
8. In the Calculation Type field is pre-filled with As Computed Value
9. In the Calculation Period field, select the Appropriate option from Month or Period based on the frequency of PT deduction whether it is done monthly or for any specified Period
10. Select Normal Rounding from the list of Rounding Methods and type 1 as the rounding Limit.
11. In the Compute field, select On Current Earnings Total from the Computation On list
12. In the Effective Date field, enter the desired date from which the Professional Tax will come into effect
13. Enter the required value in the From Amount and Amount Upto fields
14. Select Value from the List of Slabs in the Slab Type field
15. Enter the Amount for Professional Tax for each slab in the Value Basis field

Press Enter to Save.