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Tax computation in case of payment of salary arrears

Former Member
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Hi Experts,

I have a scenario wherein client wants that all the salary arrear that get's paid to employee in current financiial year should be taxed in the same year, can someone help me how to configure the same.

Ex:

Employee A - get's paid salary arrear in Oct 11 for a period of Oct 10 - Oct 11

Now how do i ensure that the tax on arrear get's incoporated in gross income for this year and tax get's computed accordingly.

Regards,

J

Accepted Solutions (0)

Answers (1)

Answers (1)

swapnil_takte
Contributor
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Hi

For this you only nee to config the CF & BF wage types as well a if your using INDIA payroll then you need to config these WTs in to the PCR like IN41, IN42 & IN44.

Remaining thing regarding the Tax on arrear system will take care of this so don't worry on that. Just check it..

Swapnil

Former Member
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Hi Swapnil,

Thanks for your prompt response.

But my query is that since CF and BF wage types are technical which get generated when we run retro for 0008 but the question is since we went live in Aug 2011 and this arrear client wants to give is from 2010 august and our retro date is 1,aug,2011

Can you guide how will we handle such kind of scenario. Since retro cannot be run from 2010.

regards,

J

Former Member
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Hi,

You mean to say that retro cannot happen as system is live from aug 2011 and there is no data prior to that in system to run retro right.In that case the arrears has to be calculated outside SAP and you will have to create Arrears wagetypes of all the arrears which are to be paid to employees(Its a extra work for you) and these wagetypes can be taxed/non taxed depending upon scenario.

Hope you are clear about this.also lets wait for Swapnils view also on this.

Salil

former_member792858
Contributor
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Hi,

As per your requirement, you have to create seperate wage type for IT0015 for arrear payment. you have to mark cumulation Class 25 " Monthly Irregular income " to make those Wage types taxable.

Nasim

Former Member
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I guess there is another complication involving Cross Financial Year retro deduction, as the tax to be deducted from Oct 2010 to March 2011 falls in a completely different financial year. So the wage type /616 has an issue and esp if the payment is being processed for a bulk of or 100s of employees, it is a hassle..

I too am stuck in a similar situation. In my case the arrears are to be paid from Jan 2011 till Nov 2011. Here Jan 2011 to March 2011 falls in different financial year and April 2011 till date falls in another.

This has been a peace spoiler for me. Any suggestions can put me at ease.