Setting up Zoho Payroll

Before you can start processing pay runs using Zoho Payroll, you need to set up your organisation, which is a simple and breezy five step process.

  1. Organisation Setup
  2. Tax Information
  3. Pay Schedule
  4. Statutory Components
  5. Salary Components


To get started, go to the signup page and create a Zoho account. If you already have one, log into your existing Zoho account.

Step 1: Organisation Setup

Organisation Setup

Step 2: Tax Information

In this page, you need to enter your tax details such as your Personal Account Number (PAN), Tax Deduction and Collection Account Number (TAN), TDS Circle / AO Code and Tax Deduction Frequency. These details will be displayed in the Form 16 we generate for your employees.

Tax Setup

PAN

A Permanent Account Number (PAN) card is a vital document for any taxpayer. PAN is a 10-digit alphanumeric number. Any corporate organisation doing business in India requires a PAN card whether it is registered in India or abroad.

TAN

Tax Deduction and Collection Account Number (TAN) is a unique 10 digit alpha numeric code whose primary purpose is deduction or collection of tax. All businesses who deduct or collect tax must have a TAN, quoting it in their TDS documents.

TDS Circle / AO Code

AO Code (Assessing Officer Code) is a combination of Area Code, AO Type, Range Code and AO Number. You can get this number from the Income Tax Office or by logging into your online Income Tax Account and navigating to the My Profile section.

Tax Payment Frequency

Tax Payment Frequency tells us how often you deposit your Tax Deducted at Source (TDS) to the Income Tax Department. It will be set as Monthly by default. If your business follows a different tax payment frequency, write to us at support@zohopayroll.com and we’ll enable it for you.

Click Save & Continue once you’ve entered the tax information.

Step 3: Pay Schedule

Pay Schedule is the combination of two things - your pay frequency, which is how often you pay your employees and your pay date. This will help us to remind you to process your payrolls on time.

Pay Schedule

Step 4: Statutory Components

‌These are components defined under certain enactments passed by government bodies like Employee Provident Fund Organisation (EPFO) and Employees’ State Insurance Corporation (ESIC). Contributions are made by employees and the employer towards the employees’ long term financial and social well-being.

There are 4 main statutory components in India:

Employee Provident Fund

EPF is a retirement benefit scheme available to all employees. The main purpose of this scheme is to help employees save a fraction of their salaries every month (12% of Basic Pay + DA), so that they can use it when they retire or if they develop any disability.

To set up EPF for your organisation,

EPF

Once you’ve set up EPF for your organisation, all you need to do is configure it when you add a new employee. Their PF contributions will be deducted automatically every month.

Employee State Insurance

‌This is a self-financing social security and health insurance scheme applicable only to employees whose monthly salary is ₹21,000 or less. The employees’ contribution for ESI is 1.75% of Gross Pay and your contribution would be 4.75% of Gross Pay. It is available in all states except ‌Manipur, Sikkim, Arunachal Pradesh and Mizoram.

To set up ESI for your organisation,

ESI

Professional Tax

It is a tax levied on all professionals and salaried individuals by the State Governments. Employees belonging to different salary slabs would need to pay different amounts as Professional Tax. The tax slabs vary for each state or municipality. The deduction cycle may be monthly, half-yearly or yearly depending on your state.

To set up Professional Tax for your organisation,

PT

All you need to do now is configure PT when you add a new employee.

Labour Welfare Fund

‌It is a scheme which ensures social security and improved working conditions for employees. It is applicable only for employees whose monthly salary is ₹15,000 or less. The deduction cycle may be monthly, half-yearly or yearly depending on your state. Click the button to enable LWF for your organisation.

Click Continue once you’ve enable the necessary statutory components.

Step 5: Salary Components

In this section, you can select the earnings, deductions, and reimbursements that your organization offers to its employees. These components will be part of your employees’ payroll once you associate them with the employees.

Salary Components

Earnings:

To select the earnings that your organisation offers:

Insight: According to the Provident Fund Act, you can include all earnings except House Rent Allowance to calculate EPF and ESI.

All fixed earnings will be included as part of the CTC, will be considered as taxable and will be shown in the payslip as per the Government norms. Variable earnings can be tax exempted and excluded from the CTC by marking the relevant options.

Deductions:

Deduction is money that’s deducted from your employees’ monthly pay. There are two types of deductions, pre-tax and post-tax.

Pre-tax

A pre-tax deduction is money taken out of the employee’s pay before income tax is calculated. As a result, they reduce the employee’s net taxable income and thereby reduce income tax. For example, deductions made towards schemes like National Pension Scheme (NPS) or Voluntary Provident Fund (VPF) are pre-tax deductions.

Note: Zoho Payroll does not deposit the deductions to the vendors on your behalf. You will have to deposit the deductions by yourself._

To create a deduction:

Pre-tax deduction

You can associate this deduction to your employees from the Employee Details page or during pay runs.

Post-tax

A post-tax deduction is money taken out of your employees’ pay after income tax has been calculated. This does not affect the net taxable income of the employee. For example, purchases made in the company grocery store or food court are considered as post-tax deductions.

Note: Post-tax deductions are one-time. They won’t recur in subsequent pay runs.

To create post-tax deductions:

Post-tax deduction

You can associate this deduction to your employees from the Employee Details page or during pay runs. 

Reimbursements

Based on your organisation’s salary structure, you can enable reimbursements for your employees.

Add Reimbursement Component:

Reimbursement


Once you’ve finished configuring all the salary components, click Finish Setup.

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