Payroll management is the process of consist of calculation of payments to employees for their work in the company – whether it is based on time or productivity, calculation of benefits, and statutory deductions. Payroll needs to be processed by each company periodically. It may be processed weekly, bimonthly, monthly or daily
What is a Payroll System?
A payroll system is software designed to organize all the tasks of employee payment and the filing of employee taxes. These tasks can include keeping track of hours, calculating wages, withholding taxes and deductions, printing and delivering checks and paying employment taxes to the government.
Features of Payroll Management System
- Manage Employee Information Efficiently.
- Define the emoluments, deductions, leave etc.
- Generate Pay-Slip at the convenience of a mouse click.
- Generate and Manage the Payroll Processes according to the Salary Structure assigned to the employee.
- Generate all the Reports related to employee, attendance/leave, payroll etc.
- Manage your own Security
Employers need to deduct TDS under section 192 of the Income tax Act, 1961, if the salary is more than maximum amount exempt from tax. The employers also need to generate Form 24Q and Form 16 in a timely manner and submit these to the authorities.
TDS deduction are:
- HRA – House Rent Allowance Exemption is possible based on the defined criterion, if expenditure on rent is actually incurred. HRA is taxable if residing in self-occupied house property. This allowance is applicable for exemption based on the location where the employee stays.
- TRAVEL ALLOWANCE – Tax free upto 800/-pm as per current rules.
- LEAVE TRAVEL ALLOWANCE- Exemption available only in respect of two journeys performed in a block of 4 calendar years.
- CHILDREN EDUCATION ALLOWANCE – Exempt up to Rs. 100 per month per child for a maximum of 2 children
- MEDICAL ALLOWANCE – Taxable (medical reimbursement is tax-free upto 15,000).
CTC-Cost To Company
Cost to Company or CTC as it is commonly called, is the cost a company incurs when hiring an employee. CTC involves a number of other elements and is cumulative of House Rent Allowance (HRA), Provident Fund (PF), and Medical Insurance among other allowances which are added to the basic salary.
These allowances may often include free meals or meal coupons, such as Sodexo and the like, office space rent, cab service to-and-fro office, and subsidized loans et al. Basically, all these elements when combined together, form the entire Cost To Company.
To put it in simpler terms, CTC is basically a company’s spending on hiring and sustaining the services of an employee.
CTC is considered a variable pay as it varies based on various factors and thus when the CTC varies, the take home salary or net salary of the employee varies. This can be corrected by an individual by simply matching the CTC to the actual amount they are receiving.