Payroll deduction
Meaning & Definition
Payroll deduction is that portion which is deducted from the gross salary or wages of the employee before providing their net salary. These could be statutory deductions, income tax, professional tax, loan repayment, etc. The employer makes these deductions while making payroll calculations in order to arrive at the final salary payable to the employee.
Important Aspects of Payroll Deduction
- It helps to calculate the correct net salary of the employee.
- Appropriate statutory deductions are ensured.
- Provides information about the deductions made from the salary.
- Helps to maintain proper payroll accounts and other records.
- Taxes and statutory deductions are paid in time.
- Salary calculations become easy to verify.
Legal Considerations
The payroll deductions have to comply with Indian labour laws, tax laws, and social security laws. Payroll deductions would include income-tax TDS, Provident Fund (EPF), ESI, professional tax, and others as permitted by law in India.
The applicable wage laws provide that no deduction is to be made random from the wages of the employee. Any deduction is to be made only as permitted by the appropriate law and the conditions of employment.
