House Rent Allowance In Tally|Payroll configuration

House Rent Allowance is an important Salary part and rules about Tax treatment for HRA is a bit complex.Fortunately Tally Solutions timely come out with Income Tax in Salary which was a long-awaited feature for Accounting staff like me who have to fileETDS return, form No. 16 to employees, Income tax return for Staff within the stipulated time limit.You can use Income Tax on Salary in Tally only if you have enabled Payroll in Tally, created employee master and  Salary master with proper set up and posted auto fill Payroll entry.else you have to prepare all reports related to  EmployeeTaxation manual and this article is not going to help you in any way.

House Rent Allowance is also known as HRA and is widely used by companies as well as employees to claim tax relief.

In this article, I will explain you how to configure House Rent Allowance in Tally.erp 9 for a correct calculation of TDS on Salary and to generate Income Tax certificate for Employees.

Here are the steps involved in House Rent Allowance configuration in Tally

• House Rent Allowance Pay Head should be configured for Income Tax
• Basic and Dearness Allowance (DA) Pay Heads should be configured for Income Tax
• Declaration of Rent paid and proof submitted by Employee should be correctly specified for the period along with the Type of City (Metro or Non- Metro)

Detailed Steps:

HOUSE RENT ALLOWANCE BASIC SET UP

1. Configuring HRA Pay Head

1. Go to Gateway of Tally > Payroll Info. > Income Tax Details > Pay Head Configuration
2. Select House Rent Allowance pay Head and press Enter
3. In the Income Tax Configuration screen,
   • Name of Pay Head/Ledger is defaulted with Ledger Name
   • Master Type is prefilled with Pay Head or Ledger
   • Income Tax Component should be selected as House Rent Allowance
   • Select the Tax Calculation Basis and Deduct TDS across Period(s) as shown:

1. • Press Enter to save.

CONFIGURING HOUSE RENT ALLOWANCE FOR INCOME TAX

Similar to House Rent Allowance  Pay Head the Basic and DA Pay Heads also should be configured for the Income Tax. This can be done from Pay Head Configuration screen or from the Tax Configuration screen

1. Go to Gateway of Tally > Payroll Info. > Income Tax Details > Pay Head Configuration
2. Select the required Pay Heads and select the relevant Income Tax Components

Completed Income Tax Configuration screens for Basic / DA appears as shown:

ADJUSTING HOUSE RENT ALLOWANCE FOR RENT PAID AND PROOF SUBMITTED

Declaration of Rent Paid and proof submitted

Once the HRA, Basic and DA Pay Heads are correctly configured, you will have to enter the Rent Declaration/proof details provided by the Employees.

1. Go to Gateway of Tally > Payroll Info. > Income Tax Details > Declarations
2. In the Income Declarations screen select, House Rent Allowance
3. Select the required Employee for whom Rent details needs to be entered from the list and press Enter (Select All Items to specify the Rent Details for all the Employees in single screen)
4. In the Rent Declaration screen,
   • Specify the date in the Effective From field
   • Specify the Amount declared as rent in the Rent Declared Amount field
   • If the Employee has submitted the rent proofs also, then the amount can be entered in the Rent Proof Amount field (rent declared and actual rent paid can be different).
   • Select Metro or Non-Metro based on the type of city
   • If the place of residence is changed or if the rent has changed in between the year, the same needs to be specified in the 2nd line.

The completed Rent Declaration screen appears as shown:

Note: Monthly rent needs to be entered and same amount will be taken up for the remaining month if the rent paid is not changed in between the year.

Once the above three steps are completed, the House Rent exemption can be computed successfully.

The Income Tax Computation screen displays the House Rent values as shown after the successful configuration:

1. Gateway of Tally > Display > Payroll Reports > Statutory Reports > Income Tax > Computation
2. Select the employee

so, the set up for House Rent Allowance in Tally is complete and you can cheers!

Income Tax in Tally is available only if you are using Tally.erp 9 and your Tally.net Service is active. If your TNS is expired than you may renew it online through us  and can get our free support in payroll set up for your organisation.

In coming days,we will discuss the rules relating to House Rent Allowance as per Income Tax Act. That will help you to understand it more clearly.