What are Current Deductions?

Created by Product Content Team, Modified on Wed, 18 Jun at 5:10 PM by Product Content Team

The entire amount earned by employees for the payroll cycle may not be payable to employees because there could be various statutory deductions, organization-specific deductions, and one-time deductions. Deductions affect the actual compensation, i.e. Net Pay of the employee.

Payroll Processor will receive the information on statutory social security deductions from HR. Typically, this covers Employee Provident Fund (EPF), Employees State Insurance (ESI), and Group Medical Insurance scheme (if any).

Profession Tax (PT) is a mandatory deduction based on compensation and is a checklist item for Payroll Processor to refer to official circulars and updates and arrive at PT rates, deduct and deposit it to the Local Government Agency.

Another important deduction is Income Tax. Payroll Process has to ensure that Income Tax as per Government regulation has been deducted (TDS - Tax Deducted at Source) and deposited to the IT department. This has a specific window of the financial year (April - March) and in case the employee is not giving sufficient proof for tax saving investments, additional IT deduction can also be applicable.

When an employee avails personal loan or a salary advance type of financial assistance from the company, there could be recurring deductions in the form of EMI (Equated Monthly Installment). Based on instructions from HR/Accounts, this can come up as another deduction.

In addition to this, one-time deductions can also be there. For Example, one-time deductions are Fines, Recoveries, etc.

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