When an employee joins, the organization should request both the employee tax code and National Insurance number. Using this information, along with their earnings to date, they can calculate how much tax needs to be paid. A payroll tax is something which is levied by Government of India on the payroll of an employer. With this tax, it includes all the forms of remuneration paid to his/her employee by the employer.
Without considering the economic status, family status or any other circumstances of the employee this Payroll tax is charged by the Government of India. So the tax on which the employer pays on behalf of his/ her employee is known as Payroll Taxes. This tax is charged without taking into consideration the employee’s domicile, family status or any other individual circumstances. In short, payroll taxes are taxes required to be paid or withheld by an employer on behalf of his or her employees.
Objectives in Payroll Tax
- To help in the growth and enhancement of the business sector.
- To provide the provision of the rebate, that is paid by the employer for his/her employees.
- To help prepare businesses during their formative years of functioning.
- The aid businesses looking to shift base from one location to another.
- To help businesses that are looking to expand their payroll and who are looking to undertake the liability of the payment of payroll taxes.
Paying the payroll tax involves 4 major categories.
Tax- It includes many taxes few of them are Direct Tax, Indirect Tax, Self Assessment Tax etc.
Income Tax- It consists of various slabs like Income Tax Slab, Income Tax Return, Income Tax Refund, Income Tax for Senior Citizens etc.
TDS (Tax Deducted at Source) – It is a means of collecting income tax in India, under the Indian Income Tax Act of 1961. Any payment covered under these provisions shall be paid after deducting prescribed percentage. Few of them are Medical Allowance, Conveyance Allowance, Dearness Allowance, Special Allowance etc.
Forms & Sections- This is a crucial category where understanding the valid forms and proper sections for claiming taxes, TDS should be known. Few important forms are Form 10C, Form 16, Deduction Under Section 80G, Deductions Under 80C, Section 80DD – Deductions On Medical Expenditure etc.
To pay the taxes the responsibility must be taken by both the employee and the organization so that missing a deadline or payment can be avoided and enjoying the benefits of paying taxes can be ensured.