pay head creation in tally -Lesson3

Are you new to our payroll tutorial, then you would probably like to read our previous lessons. The entire tutorial is based on given example in lesson1

Lesson 1 How to activate payroll & manual payroll calculation

Lesson 2 Payroll master creation

Pay heads may be either earnings of an employee or deduction from his earning etc. Pay heads are created for following purposes.

1. Employee earning pay heads
2. Deduction from employee salary
3. Employees statutory deduction
4. Employers statutory contributions
5. Bonus Pay head
6. Gratuity

Use of pay head is not limited to above. You can create your own as per your company payroll requirements.

Let us come to our example given in our first lesson

We need to create the following 17 pay head to pay the salary of Mr Anand, and Mr Krishna. And also for the statutory compliances of Abc Ltd.

Earning pay heads

1. Basic
2. D.A
3. HRA
4. Conveyance
5. Entertainment allowances.
6. Performance allowance
7. Washing allowance.

Employee Statutory& other deduction pay heads

1. . Salary advance
2. Employee ESI share@1.75%
3. Employee EPF share@12%
4. Professional Tax

Employer statutory and other charges pay heads.

1. Esi employer contribution @ 4.75 %
2. Employer pension scheme @8.33%
3. EPF employer contribution @ 3.67%
4. EPF admin charges@ 1.10 %
5. EDLI contribution@0.5%
6. EDLI admin charges@ 0.01

Pay heads in similar nature is created only once in this tutorial, your query can be commented in our comment section. So let us start creating pay head

Gateway of tally » Payroll info» Pay heads »Create

creation “Basic” pay head, As per given example salary is paid on the basis of attendance , calculation type should be selected on attendance.  below image will give you a clear picture

You can create DA, Conveyance, Entertainment, Performance allowances, washing allowance in the same manner. Set yes or no for “use of gratuity” wherever is necessary.

HRA Pay head creation

In the given example HRA is calculated on 25 % of total of BASIC AND DA, How to automate this?Under pay head info screen Select calculation type As Computed Value .In computation info screen Select compute on specified formula as in the picture below

In the next filed specified formula, select the BASIC, DA pay head from the popup screen

Select slab type is percentage and enters the percentage value in the next column. The HRA Pay head is ready for auto computation.

In the given example you need to create separate HRA pay head for sales department and admin department. Because HRA of sales dept is a certain percentage on total of BASIC+DA,Whereas admin department has a fixed monthly amount. so create an additional  HRA (admin dept) pay head in the same manner you created Basic pay head.

In the next lesson we will discuss  employees statutory and other  deduction pay head . In the mean time  you can subscribe our news letter below, enable  us to deliver all  updates  on this site directly in your inbox.

Complete Lesson in our Tally payroll tutorial

Lesson-1 How to process payroll in tally

Lesson-2 Payroll master creation

Lesson-3 Pay head creation

Lesson-4 Employees salary deduction pay head creation

Lesson-5 Employer statutory contributions and other charges pay head creation

Lesson-6  Defining Salary structurein tally for faster data entry

Lesson-7  creating payable ledger and attendance voucher entry

Lesson-8  Processing of Salary PF, ESI