Pay Heads Creation in Tally – Blog Ankit IT Solutions

Gateway Of Tally >> Create >> Pay Heads

Pay Heads may be broadly considered as Earnings and Deductions from an employee’s point of
view. However, these pay heads would still be Expense and Liability from the employer’s view
point.

Pay heads refer to the specific components or elements that make up an employee’s salary or wages. Which represent the various earnings, deductions, or contributions that are included in an employee’s payroll calculation.

Types Of Pay Head

A Pay Head is categorized as Allowances, Deductions or Reimbursements, In Tally Payroll, Pay Head types are provided in a natural language for ease of use, as follows:

1. Earning for Employees
2. Deduction from Employees
3. Employer’s Statutory deductions
4. Employer’s Statutory Contribution
5. Gratuity

6. Loans and Advances
7. Reimbursement to Employees

Earnings Pay Heads

These pay heads represent the components that contribute to an employee’s earnings. They include salary components such as Basic Salary, Allowances, Overtime Pay, Bonus, Incentives, and any other income-related elements.

Some examples of Earnings Pay Heads

Basic Salary,

Dearness Allowance

City Compensatory Allowance,

House Rent Allowance,

Night Shift Allowance,

Uniform Allowance,

Sales Commission

Deductions Pay Heads

These pay heads represent the components that are deducted from an employee’s salary or wages. They include deductions such as Provident Fund (PF) contributions, Tax Deducted at Source (TDS), Insurance Premiums, Loan Repayments, and any other deductions applicable to the employee.

Some examples of Deductions pay heads

Employees’ Provident Fund (EPF)

Employees’ State Insurance (ESI)

Professional Tax

Income Tax

TDS

Advance (if any)

Calculation Types

The Calculation of the Pay Head is bases on its Calculation Type. Tally payroll allows following calculation methods

1. As Flat Rate
2. On Production
3. As Computed Value
4. As User defined Value

1. As Flat Rate : As Flat Rate is a Calculation where the value of the Payroll head is a fixed amount for a period. Pro-rated. In Tally the attendance can be of Payable days (Present) or loss of pay (Absent) type.

2. On Production : On production calculation type is used to calculate the Production incentive type of Pay head. The production date can be entered in Attendance voucher against a Production type.

3. As Computed Value : As Computed Value is used if the Pay Head value is based on a dependent component. You will be able to define the dependent component by specifying the formula or using the current sub- total or current earning or deduction total. You can also define the slab either by percentage to value or the combination in a slab. i.e. HRA as 40% of Basic Salary

4. As User defined Value : As User defined Value allows you to manually enter the value at the time of processing the salary. This calculation type is useful for Pay Heads that have variable values and are not related to any attendance/production data.

Note: The formula defined in Calculation Type will be used for computation only while using Payroll Auto Fill functionality in the Payroll Voucher, and not in Manual entry mode of Payroll voucher.
Pay Head Creation in Tally