How do I choose the tax regime for specific employees?
Note: The following changes are effective in the system from April 2020 payroll onwards only.
Starting in April 2020, employees can choose how their tax liability will be computed based on the two regimes defined in the budget session. Please click here to know more about these changes. The tax calculator has been upgraded to show employees the deductions as per the old & new taxation regime. This will help the employee in choosing which investments are beneficial for them. We have also prepared an excel calculator to compare the impact on income tax for various salary brackets, under both the new and old tax structures. You can download it from our Resources Section by clicking here.
While calculating payroll, we calculate deductions as per both the regimes but apply the regime with the lowest TDS liability, so that employees are able to maximize their net take-home. We call this the Most Optimized method. As an admin, you can override this method and define manually the tax regime to be followed while computing an employee's tax liability if required. This can be done in the payroll process as shown below:
- Log into your admin account
- Go to Payroll >> Run Payroll and start the payroll process as usual
- On the Income Tax & Professional Tax Overwrite step, you will now see a new column labeled "Tax Calculation Method". Here you can choose to let the system follow the default Most Optimized calculation or force it to follow the Old Regime or New Regime as shown below.
- In case you wish to update this for multiple employees, go to Bulk Actions >> Upload Overwrite to upload the tax regimes for employees in bulk
- The tax regime chosen for an employee will be remembered by the system & automatically selected for future payroll months. So you do not have to respecify the regime once defined.