Income Tax Slab
Incone Tax Slab
Income Tax Slab is a paper that shows how much income tax employees of a company have to pay based on their taxable income brackets.
Most countries tax individual taxpayers on their income using a progressive slab system, which means that different tax rates apply to different levels of income. The tax rate goes up as the income level goes up. In Frappe HR, the Income Tax Slab document follows this idea. It lets you make and save different slabs in one structure.
The system can figure out and apply the right tax deductions for each employee during payroll runs since each Income Tax Slab record can be changed to fit local tax laws and company rules.
The payroll system can figure out how much tax to take out of an employee's salary, benefits, and deductions for the chosen Payroll Period by linking Income Tax Slabs directly to each employee's Salary Structure Assignment.
1. Making an Income Tax Slab
To add a new Income Tax Slab, follow these steps:
Click on New in the Income Tax Slab list.
For example, "Income Tax FY 2025–26" might be a good name for the Income Tax Slab that fits the year or region
Pick the company that this slab will work for.
Put in the Effective From date: This tells payroll processing when the slab starts to work.
If your local tax laws enable usual or declared exemptions (like Section 80C in India), tick the option that says "Allow Tax Exemption."
To fulfil compliance needs for your organisation or the government, you can add further fields like Fiscal Year, Country, or Notes for reference.
Click Save and then Send in the document to turn on payroll processing.
After you submit it, the tax slab will immediately be used to make salary slips and figure out how much tax all employees assigned to it through their Salary Structure Assignment would have to pay.
2. Characteristics
The Income Tax Slab document in ERPNext offers a number of useful features that help you set and keep track of tax regulations and exemptions.
2.1 Tax Brackets
In the Tax Slab kid table, you may set the tax rates that apply to different income categories. One row shows one range of income and the tax rate that goes with it.
To put together a slab:
Fill in the From Amount (lower end) and To Amount (upper end) for the slab.
For the first slab, you don't need a From Amount because it starts at zero.
The last slab doesn't need a "To Amount" because it includes all income over the last set limit.
Both limits are inclusive while calculating tax based on taxable income.
You can also use conditional logic to specify varying tax rates based on particular employee characteristics, salary structure elements, or other conditions. These can be expressed using fields found in Employee, Salary Structure, Salary Structure Assignment, or Salary Slip documents.
Examples:
Apply tax if employee born between 31-12-1937 and 01-01-1958 (Employees between 60 to 80 years old)
dateofbirth > date(1937, 12, 31) and dateofbirth < date(1958, 01, 01)
Apply tax based on employee gender
gender == "Male"
Apply tax based on Base Salary
base > 10000
Apply tax if the annual taxable income is above 5 lakhs
annualtaxableearning > 500000
These rule-based on conditions allow the tax setting to be flexible and dynamic for various tax regimes and employee types (for instance, senior citizens, expatriates, contract workers).
2.2 Other Taxes and Charges on Income Tax
In case there are extra taxes, cesses, or surcharges charged on the computed income tax, they may be set in the Other Taxes and Charges on Income Tax table.
For instance, in India, Health and Education Cess is charged on total income tax. Here, you can enter the Tax Type, Rate, and Minimum and Maximum taxable income range for which these charges are being charged in this table.
ERPNext applies these extra charges automatically on top of the calculated tax while processing payroll so that the total tax deduction correctly shows both base and additional taxes.
This facility can be utilized to manage region-wise taxes like:
Education or Health Cess
Professional Surcharge
State additional taxes
Social Security or Pension charges (if applicable in some regions)
2.3 Other Properties
Allow Tax Exemptions:
Enabling this will enable employees associated with the slab to apply exemptions through Employee Tax Exemption Declaration and Employee Tax Exemption Proof Submission. ERPNext will automatically scale down the taxable income according to these granted exemptions.
Standard Tax Exemption Amount:
This category enables you to specify a general exemption limit that is applicable to all the employees under this slab, even in the absence of supporting documents. A typical illustration is a fixed allowance or minimum exemption limit as specified by regulatory authorities.