Payroll System Overview of Tally Accounting Software  

Payroll System in Tally maintains Pay related data of Employees, Pay Computation, Statutory Deductions, Statutory Returns etc,  

The Employer must compute all statutory deductions, under respective statutory rules, Taxable salary, I Tax computation  & TDS under Income Tax.  

The employer should deposit the Amount to Government, including its own contribution, administrative Charges as applicable, and file respective statutory returns as per extant rules.  

The Payroll System is integrated with Financial Accounting System. The Payroll system may be broadly divided as follows:  

Payroll System Start Up in Tally Accounting Software

To implement Payroll system for the organisation, first Activate the Payroll in Tally. Then set up the Payroll related statutory info for the organisation in Tally.  

Payroll Masters Creation in Tally Accounting Software

Having activated the Payroll System, create various Masters. Numerous data are to be  entered in respect of each Master, particularly for Employee Master. First plan for collection of all n necessary info and input data sources from which respective info to be input.   Master creation for Employees is a massive job. Various info are to be set up for each employee correctly. So, gather all data, before you start entry.   All data relating to Employee may not be available in one place. Data may have to be input from various sources in several stages. So, plan how to gather the input data. Then do the entry in several stages, from respective input sources.  

Payroll Master Lists in Tally Accounting Software: After entry of Payroll Masters data, it is recommended to print respective Master lists and manually check data. Rectify mistakes, if any. The Employee Master Data contains various info collected from various input sources. So, it is necessary to print List of Employee Master as and when required. Check the data thoroughly and rectify mistakes.    

Payroll Vouchers Creation in Tally Accounting Software

Attendance/ Leave / Production / Overtime Datavoucher entry inin Tally Accounting Software : For each pay period, data of Attendance, Leave, absenteeism, overtime are to be entered. Pay would be computed accordingly as per Rates and computation formula specified in Masters. Production data also to be entered for Production based Pay. Employee specific Deduction and Allowances are to be entered for each Employee.

Salary Advance & Employee Loanvoucher entry in Tally Accounting Software: Sometimes, some advance is paid to Employee, to be deducted from the Pay of next Pay period. Sometimes Loan is paid to Employees, which is recovered in instalments from subsequent Pay period. Such vouchers are created at the time of payment of Advance / Loan.

Payroll Processing in Tally Accounting Software: After entry of Attendance / Leave, Amount of each Pay & Deduction Head for each Employee are computed, through Payroll Processing.  

Statutory Deductions Deposit to Government in Tally Accounting Software

Having processed the Payroll, print the respective challan for Statutory Deductions like PF, ESI, NPS, P Tax, Income Tax,  etc, as applicable for the organisation.  

Create Voucher for deposit of Statutory Dues with Government, as per challan printed. Deposit the Amount with Bank through the Challan.  

Payroll Reports in Tally Accounting Software

After Payroll processing, various Payroll related reports may be displayed / Printed. For each Report, the user may set up various configuration options to customise the contents, as desired. Configuration option may be re-set for specific report, at the time of Report Display / Printing.    

Employee Other Payments in Tally Accounting Software

Apart from Regular Payment for each Pay Period, additional Payments may be made time to time, like Final Payment to Employee, Gratuity, etc., on severance of Employment like, Retirement, Resignation, Retrenchment, etc. Bonus Payments, Arrear Pay on payments from retrospective effect, etc.  

Employee Bonus in Tally Accounting Software  : Bonus is paid periodically, based on Salary paid during previous year. Often Bonus is paid through separate Payment Voucher. Bonus may also be paid along with salary through Employee specific input in the relevant Pay period.

Employee Arrear Pay in Tally Accounting Software : Normally, increase in pay is applied from current or future Pay period. However, Sometimes,  increase in pay be computed from retrospective effect, as per rule announced by the organisation. Arrears Pay are  to be computed separately from the Salary paid during the relevant period and Salary computed as per revised rule. The difference would be computed as Arrear Pay. Often Arrears are paid through separate Payment Voucher, or may also be paid as additional sum, along with regular salary payment through Employee specific input in the relevant Pay period. Sometimes, Arrears may also be paid in instalments.

Employee Gratuity in Tally Accounting Software  : This is paid on termination of employment (on Resignation, Retirement etc), or on death of Employee. Some organisation make provision for Gratuity for each Pay period. Such amount is computed through Payroll Process.  Alternatively, some organisation account for Gratuity, at the time of Payment, on Cash Basis. Some organisation make contribution to Approved Gratuity Fund. Gratuity Provision may be computed on processing. At the time of Payment of Gratuity, voucher is created for Actual Gratuity payable amount, as per Last salary drawn, and period of Service.  

Employee Payroll System Start Up in Tally Accounting Software 

Payroll System is to be activated and various info of theorganisation must be initially set up to start the Payroll system.

  • Company Payroll Activation in Tally Accounting Software: To maintain Payroll System, activate the Payroll option
  • Company Statutory Details set up in Tally Accounting Software: Activate the applicable Statutory Deductions (Like PF, ESI, NPS, P Tax, I Tax)   for the Company and set up relevant details.

Payroll Masters in Tally Accounting Software

Several Masters relating to be Payroll System are to be created. Some of them are Mandatory, which must be created by all organisation, others are created as applicable to organisation.  

Employee Group  : Employee Group creation is optional. Employee Group helps to organise Payroll Reports, particularly for organisations with large number of Employees. Employee Group also helps Pay & Deduction computation for common heads applicable to number of Employees.

Employee Category : Employee Category is a parallel classification to Employee Group, which helps better organisation Payroll System with large number of Employees.. Employee Category is also optional.

Employee : For each Employee, Employee Master is to be created, which contains various details of the Employee.

Payroll UoM : Payroll UoM Master is to be created for computation purpose, (like Days, Months, Hours etc), as required.

Pay Heads : For Each Pay Head and Deduction Head, a Pay Head Master is to be created, specified the computation rule and formula

Pay Structure : Pay Structure is the set of applicable Heads of Pay and Deduction for respective Employee. Computation of Pay / Deduction of each Pay & Deduction Head is done as per rules, formula and rates specified for respective Pay Head in the Pay Structure of the Employee.

Attendance / Production Type : Attendance Heads defines various Attendance, Leave and Production Heads (For Production based Pay Heads) Overtime, etc. Some organisations may further classify these heads into finer levels, for analysis and pay computation. For example, Attendance may be for Night Hours, Normal Hours, etc , Leave may be classified as like Paid Leave, Without Pay Leave etc. Paid Leave may further be classified as Privilege Leave, Medical Leave, Maternity Leave, Special Leave etc. Overtime may further be classified as  Normal OT, Holiday OT etc,

Employee Income Tax set up : Set up various heads of Pay & Deduction for computation of Taxable Income, Perquisites, Profits in lieu of salary, Allowances and exemption, Tax Deductions and limits, Other Income declared by Employee,. For First time Payroll System Start, it is massive work for organisations have many Income Tax assesees.  So, gather all data first before you start entry.  

Payroll Voucher in Tally Accounting Software

Employee Attendance / Production voucher entry : Where Payroll is computed on the bass of Attendance, Production, first enter the Attendance, Leave, Overtime, Production etc, for each employee, for each Pay Period.  

Employee Payroll Processing : Process the Payroll to compute the Pay Deduction amount for each Employee.  Enter user defined Allowance / Deductions which are not auto computed during processing. Process for Statutory Deductions like PF, ESI, NPS, P Tax Income Tax, as applicable, to compute the amount in respect of each Employee. After the processing, The amount of all Pay, Deduction heads and Net Pay get computed.  

Payroll Statutory Deductions Challan Printing in Tally Accounting Software

Having processed the Payroll, process for Computation of amount to be deposited with Government and print the respective challan for deposit to government.  

Employee Provident Fund (PF) : Process the Amount of Employer’s PF Share, Employees’ PF Share,  PF Administrative charges.  PF is compossed of Employees Provident Fund (EPF),

Employees Pension Find (EPS), Employees Deposit Linked Insurance (EDLIS),  PF Administration charges is composed of EPF Administration Charges, EDLIS Administration charges. Print the Combined P F Challan in proper Form, showing the figures under each head. Deposit the amount in Bank through the printed challan.

Employee State Insurance (ESI) : Process the Amount of ESI for each Employee, Employers ESI Share. Print the ESI challan, showing Employer’s & Employees Contribution. Deposit the amount in Bank through the printed challan.

National Pension Scheme (NPS) : Process the NPS as per specified Calculation Method. Alternatively, NPS may also input for each Employee. NPS may be defined as Fixed Value deduction, for applicable Employees. There is no module to Print NPS challan in Tally. NPS is to be deposited to the respective PoP.

Profession Tax  (P Tax): Professional Tax is applicable in few States. The rules and rates are different for each State. The rules and Formula of P Tax computation should be set accordingly. Process the P Tax. There is no P Tax Challan Printing module in Tally, as the P Tax Form and P Tax Return vary according to States. Fill up the respective P Tax Challan and deposit the P Tax, with the prescribed authority, as per rules.

Income Tax TDS  : Process the Amount of I Tax  TDS  for respective Employee,  Print the I Tax TDS Challan showing Total Amount to be deposited. Penalty & Interest may also be included along with TDS, where applicable. Alternatively, separate Challan I tax Deduction (TDS), Penalty & Interest (where applicable) may be printed. The amount may be deposited through designated Bank Counter or on-line through Income Tax Portal.  

Payroll Reports Display &  Printing in Tally Accounting Software

After Payroll processing, all payroll related reports may be viewed / printed. The contents of Report may be customised to some extent, through Report Display Configuration and Report Printing Configuration options of respective Report.  

Pay Slip : Pay Slip is individual Slip giving the details of Pay for each Employee. This is handed over to the Employee, at the time of Salary Payment, for their info and reference.

Pay Sheet : Pay Sheet is register of Employees showing the details of Pay for each Employee, in register format. Paysheet may be printed as per department, Employee Category etc. Some organisation get the signature of Employees in the Pay Sheet.

Payment Advice : Payment Advice is a letter like advice to Bank for deposit of Net pay to the respective Employee Account as mentioned in the Letter. This is quick and easy method of Payment to a number of Employees through one document. This sytem is useful when almost all employees have their Bank Accounts with a common Bank Account.

Payroll Statement : Payroll Statement shows the employee wise details of selected Pay / Deduction Head. This is thus a Ledger statement of the Pay / Deduction Head with Employee details for specified period.

Payroll Register : Payroll Register shows the Payroll Voucher list of for a specified Pay Period. Payment Advice

Attendance Sheet : Attendance Sheet shows the details of Attendance, Leave & Production Heads, for respective employee.

Attendance Register : Attendance Register shows the Attendance Voucher list of for a specified Period.

Expatriate Reports :  Expatriate Employees are foreign nationals who are employed  on work assignments on Contract Basis, complying the rules. Expat Reports shows the list of Passport Expiry, Visa Expiry, Contract Expiry reports etc, for tracking of Expatriate Employees.  

Payroll Statutory Returns Printing in Tally Accounting Software 

Provident Fund Statutory Returns Printing in Tally Accounting Software

Payroll Provident Fund Statutory Returns  Summary : Payroll Statutory Summary report shows the summary of all statutory deduction sin specified period.

Provident Fund Monthly Form 5 : Provident Fund Form 5 shows the details of new employees joined under P F Scheme, during the specified month.

Provident Fund Monthly Form 10 : Provident Fund Form 10 shows the details of  employees leaving during the specified month.

Provident Fund Monthly Form 12A : Provident Fund Form 12A shows the amount of Wages and corresponding details of  PF contributions under different Accounts for the  specified month.

Provident Fund Monthly Report : Shows employee wise details of P F Contribution under each PF Account.

Payroll Provident Fund Annual Form 3A: PF Annual Form 3A is an Employee-wise Annual report for the Amounts deducted/contributed by the Employee and the Employer towards the EPF, VPF, and EPS Accounts.

Payroll Provident Fund Annual Form 6A : PF Form 6A is the Annual Statement of contribution towards each PF Accounts for all PF contributors.

Provident Fund Electronic Challan cum Return (ECR) generation & Filing: Electronic Challan cum Return (ECR) is an electronic return in plain text format (Tally creates the File in SDF – Fixed Width). Employers may Returns in Electronic Form, in lieu of Physical form. This return is in text format of Form 5, 10, 12A, 3A, and 6A.

The ECR file will be created in the TallyPrime installation folder in .txt format Next, go to the folder where TallyPrime is installed and open the ECR file which is saved in .txt format. Upload the ECR file on the ECR portal of Employees’ Provident Fund website, to capture the PF contribution of the employee.  

Payroll ESI Statutory Returns Printing in Tally Accounting Software

ESI Monthly Return Form 3: ESI Form 3 shows the details of new employees joined under the ESI Scheme during the specified month.

ESI Monthly Statement : ESI Monthly Statement shows the details of the Amounts contributed by Employees and Employer during the specified month.

ESI Half-Yearly Return Form 5: ESI Form 5 shows the details of Deposit of Employer & Employee Contribution for the specified Half Year, with employee wise details of Contribution under respective heads. At the end of the return, the declaration section shows the report of various statutory forms submitted under the ESI rules.

ESI Half-Yearly Return Form 6: ESI Form 6 shows the details of Employee wages, Employer & Employee Contribution details for each employee.  

Payroll Professional Tax Statutory Returns Printing in Tally Accounting Software

Professional Tax is State matter, so the rules and Return Formats differ from state to State.

Professional Tax Computation Report : Professional Tax Computation Report shows the details of emoluments paid to employee and corresponding P Tax deduction from the employees for specified month.

Professional Tax Statement : Professional Tax Statement shows the working days, amount of pay, and P Tax deducted from each P Tax Deductee, for specified period.  

National Pension Scheme Statutory Returns Printing in Tally Accounting Software

Under National Pension Scheme, after retirement, the subscriber can take out portion of the corpus, and receive the remaining amount as a monthly pension post retirement. NPS Accounts are of 2 categories. Tier 1, is the principal NPS account for building a retirement fund. Tire 1 account runs upto 60 years. Partial withdrawals allowed in exceptional case. Tier 2 is like voluntary savings account for deposits and withdrawals.

National Pension Scheme Subscriber Contribution Details : NPS Subscriber Contribution Details statement shows the Employer’s and Employees contribution to Tier 1 Account and Employees contribution to Tier 2 Account.

National Pension Scheme Summary Report : NPS Summary Report shows the summary of total wages, employer and employees contribution to each account, for deposit to Government.

National Pension Scheme (Permanent Retirement Account Number) PRAN Missing : Every subscriber is allotted a PRAN (Permanent Retirement Account Number). PRAN Not Available Report is an exception  report for tracking of Employees list for which PRAN is not filled up. It helps to update Employee PRAN quickly.  

Gratuity Statutory Returns Printing in Tally Accounting Software

Employee Gratuity Summary : Gratuity Summary shows the details of Gratuity notionally computed amount, as per last drawn salary and employment period.

Employee Income Tax Reports Display & Printing in Tally Accounting Software

Employee Income Tax Computation Report: Income Tax Computation Report shows the details of each employee remuneration, compatible to Form 16 Format, showing Total tax Payable, TDS already deducted, Balance TDS to be deducted in subsequent month. It also shows further details of HRA Computation.

Employee Salary Projection Report: Salary Projection Report shows computed details of projected earnings and deduction for each Employee, for the Financial Year. The projected figures are gradually updated with actuals after payroll processing for each period. This report helps to make estimate of monthly TDS to be deducted.

Employee Salary TDS Challan reconciliation statement: For deposit of Employee Salary TDS, Income Tax challan is printed. The Income Tax challan number is allotted on deposit of TDS Amount, which is recorded in the Voucher. The amount Income Tax Challan reconciliation statement shows the Tax deposit vouchers and challan numbers to track Saary TDS deposit to government.

Employee Income Tax PAN Missing: Every I Tax assesee is allotted a PAN (Permanent Account Number). PAN Not Available Report is an exception  report for tracking of Employees list for which PAN is not filled up. It helps to update Employee PAN quickly.

Employee Additional Details : This report shows various additional details of Employee. It helps verification, updation and rectification of Employee Data.

Employee TDS Variance Report : TDS Variance Report shows the TDS deducted and Balance TDS to be deducted in subsequent period of the Financial Year. It helps complete recovery of TDS from Employee salary.  

Employee Income Tax Statutory Returns Printing in Tally Accounting Software

Employee Income Tax Form 24Q : Form 24Q is a Quarterly Return containing details of the summary of salary paid, Tax Deducted from the employees, and Tax Deposit Challan Numbers. The Annexures I and Annexures II are also to be submitted along with Form 24Q

Employee Income Tax Form 24Q Annexure I: Form 24Q Annexure I shows the Employee wise details of Taxable Amount, TDS, Cess, details of Tax Deposited,  in respect of each Employee as per Form 24Q. The Annexure I also to be submitted along with Form 24Q, for each Quarter.

Employee Income Tax Form 24Q Annexure II: Form 24Q Annexure II shows the Employee wise details of Pay Period, type of deductee,  Salary, additional benefits like House Rent Allowance, Perquisites, Profits in Lieu of salary, Salary received from Other employers, Travel Concession, Gratuity, Commuted Value of Pension, Leave salary Encashment, PAN of Landlord, Exempted Income under respective heads, details of Deduction under respective heads, etc,  Taxable Income, Rebates, Tax Amount. Surcharge, Cess, Net Tax Liability, Tax Deducted, Tax Deduction Shortfall / Excess etc. The Annexure II to be submitted along with Form 24Q of last Quarter of Financial Year.

Employee Income Tax Form 16: Form 16 is TDS certificate issued by Employer, showing the Income  and TDS deducted and Tax deposit to government details in respect of an Employee. Part A of the form shows the summary of Emoluments & TDS, while part B shows the details of Salary, Deductions, computation of Tax and TDS.

Employee Income Tax Form 12BA : Form 12BA shows the value in respect of additional benefits / Perquisites enjoyed by the Employee like, Amenities/ Benefits, Cars, Sweat Equity, Club expenses, credit card expenses, Free Education, Free Meals, Free / Concessional Trave, Gas/Electricity/Water, Holiday Expenses, Interest Free Loan, Rent Free Accommodation, Services of Sweeper, Gardener, Helper, Watchman or any Personal Assistant, Transfer of Asset to Employee, value of Profits in Lieu of salary, etc,

Employee Income Tax ITR-1 :  ITR-1 (SAHAJ) is the Income Tax Return in respect of each Taxable Employee, in which respective details as per Annual Returns are shown.