As per the Income Tax Act, employer's contribution to NPS qualifies for a tax deduction of up to 10 per cent of the salary. Therefore, adding the NPS (Employer’s contribution) component to your salary structure is necessary to claim the tax deduction on it. This document demonstrates how this can be done.
Go to the Payroll (1) menu. Under Settings (2), click on Pay groups (3). If there are multiple pay groups, make a choice. Then, click on the configure icon (4) against the pay group.
On the window that opens next, click on Salary components (5). Find Recurring components (6) and type in NPS in the search bar (7) under it. When the component name (NPS) appears, click on the edit icon (8) against it under Actions.
On the Edit salary component- NPS employer window, use the toggle to Enable (9) the component. Now, click Update (10).
The next step is adding the component to the salary structure.
Go to the Payroll (1) menu once again. Under Settings (2), click on Pay groups (3). Choose the pay group and click on the configure icon (4) against it.
Click on Salary structures (5) and then on Edit salary structure (6).
On the next window that pops up, click on +Add component (7).
In the search field on the overlay window, search out the NPS (8) component. When it appears, check the box (9) against it. Now, click Add component (10).
On the Edit salary structure window, find the component name. Under that, see the Formula for value / fixed value box and click on the edit icon (11) there.
On the overlay window that pops up, enter the formula for calculation (12) in the space provided. Then, click Update (13).
It is hoped that you found this document helpful. If you have any more queries, please refer to the other articles or contact our product experts.
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