Payroll Dilemma: How to Handle PT Deductions for April and May in Final Settlement?

Dear All,

Please help me with the following query: An employee worked until the 11th of May, and his salary for April was on hold. Now, at the time of full and final payment, do we need to deduct PT for both April and May, or only for May? He was not paid anything in April. All payments are being made in May. His gross salary is above 15,000/-

Thanks

We have faced such problems before. I do not know the solution. I hope the seniors will give us one.

What we do to be safe is to pay the higher amount. In your case, pay PT for both months. Actually, you should have paid PT at the end of April for the withheld salary.

Dear Saswata,

Per my understanding, the PT is to be deducted in case the monthly gross salary (payable) crosses 10K, irrespective of the number of days the employee has worked in a particular month. Here in this case, PT is to be deducted for April only and not for May as the payable salary for the latter is less than 10K (11 days salary).

Regards,
Sumeet Pattnaik
9860828552

As per the rules of professional tax, you must deduct the professional tax at the time of payment to the employee.

But since the salary is not paid in April and sometimes not be paid (if the notice period is not completed), do we need to pay it in April because the salary is payable or when the amount is actually paid?

Dear Saswata,

Even if the salary is to be withheld for whatever reason, the payment should be processed. The company is liable to deduct the PT at the time of processing the salary.

Later, if the company decides the salary of the individual can be held from uploading onto the bank account/link, i.e., crediting into his bank account. I hope, in this case, the salary is already processed.

Regards,
Sumeet Pattnaik

Dear Gaurir,

Why the confusion? You need to generate regular payroll with all statutory deductions such as PF, ESI, Professional Tax, Income Tax (if applicable), etc. The net salary payable amount you may keep in suspense or in the salary payable account. If you deduct Professional Tax through the monthly salary of an employee and their salary is held for any reason, you need to pay the deducted amount to the respective authority along with other employees. You cannot hold Professional Tax payment.

Similarly, while making full and final settlement of the account, generally we consider Leave encashment, Gratuity, Bonus, etc. However, on Bonus and Gratuity amounts, Professional Tax is not deductible. If the leave encashment amount is liable for Professional Tax deduction, deduct it as per the applicable rate, else ignore it.

Regards,
Suresh

Thank you all. My dilemma was, since no amount has been paid to the employee, should we still deduct the tax. From the discussion here, I understood that PT is to be paid on processing and not on payment.