Defining Pay Heads (Earnings, Deductions, etc.) in Tally Prime
In Tally Prime, pay heads are used to define the components of an employee's salary, such as earnings, deductions, and other allowances. By defining pay heads, you can calculate, manage, and report employee salary components efficiently. This article will guide you step-by-step on how to define earnings, deductions, and other pay heads in Tally Prime with real examples.
1. Enabling Payroll Features
Step 1: Enable Payroll Features in Tally Prime
Open Tally Prime and go to Gateway of Tally → F11: Features → Payroll Settings.
In the Payroll Settings screen, set Enable Payroll to "Yes".
Press Enter to save the changes.
Once payroll is enabled, you can define various pay heads for earnings and deductions.
2. Defining Pay Heads for Earnings
Step 1: Create Earnings Pay Head
Earnings pay heads represent the salary components that contribute to an employee's gross salary, such as Basic Salary, HRA (House Rent Allowance), Special Allowance, etc.
Go to Gateway of Tally → Payroll Info → Pay Heads → Create.
In the Name field, enter the name of the earnings pay head (e.g., "Basic Salary").
In the Type of Pay Head field, select Earnings.
Under Under, select the appropriate ledger (e.g., "Salary").
If the earnings component is a fixed amount (e.g., fixed Basic Salary), enter the amount or leave it blank for manual entry during payroll processing.
Press Enter to save the pay head.
Example: Creating Basic Salary Pay Head
Name: Basic Salary
Type of Pay Head: Earnings
Under: Salary
3. Defining Pay Heads for Deductions
Step 1: Create Deductions Pay Head
Deductions pay heads are used to subtract amounts from an employee's salary, such as Provident Fund (PF), Professional Tax (PT), or Tax Deducted at Source (TDS).
Go to Gateway of Tally → Payroll Info → Pay Heads → Create.
In the Name field, enter the name of the deductions pay head (e.g., "Provident Fund").
In the Type of Pay Head field, select Deductions.
Under Under, select the relevant ledger (e.g., "Statutory Deductions").
In the Calculation Type field, you can choose to set the deduction as a fixed amount or as a percentage of earnings.
Press Enter to save the deductions pay head.
Example: Creating Provident Fund Pay Head
Name: Provident Fund
Type of Pay Head: Deductions
Under: Statutory Deductions
Calculation Type: Percentage of Earnings (e.g., 12%)
4. Defining Pay Heads for Other Components
Step 1: Create Other Pay Head
Other pay heads are used for non-earnings or non-deduction components that need to be recorded, such as Bonuses, Gratuity, or Loan Advances.
Go to Gateway of Tally → Payroll Info → Pay Heads → Create.
In the Name field, enter the name of the pay head (e.g., "Bonus").
In the Type of Pay Head field, select Other.
Under Under, select the appropriate ledger (e.g., "Bonus Expense").
Press Enter to save the pay head.
Example: Creating Bonus Pay Head
Name: Bonus
Type of Pay Head: Other
Under: Bonus Expense
5. Setting Pay Head for Employee Salary
Step 1: Assign Pay Head to Employee
After defining the pay heads, you need to assign them to the employee master to calculate the salary correctly. This includes assigning earnings, deductions, and other pay heads to individual employees.
Go to Gateway of Tally → Payroll Info → Employees → Alter.
Choose the employee (e.g., "John Doe") from the list.
In the Salary Details section, assign the relevant pay heads. For example:
Basic Salary: ₹25,000
Provident Fund: ₹3,000 (12% of Basic Salary)
Bonus: ₹5,000
Press Enter to save the employee details.
6. Viewing and Editing Pay Heads
Step 1: View Pay Heads
To view all pay heads defined in Tally Prime, go to Gateway of Tally → Payroll Info → Pay Heads → Display.
Step 2: Edit Pay Heads
If you need to modify an existing pay head, go to Gateway of Tally → Payroll Info → Pay Heads → Alter, select the pay head, and make the necessary changes.
7. Conclusion
Defining pay heads for earnings, deductions, and other components in Tally Prime is a crucial step in managing payroll efficiently. By following the steps mentioned in this article, you can set up pay heads and assign them to employees, ensuring accurate salary calculations. This helps in maintaining transparent and organized payroll management in your business.