Washing Allowance Exemption in Form 16 under Section 10 using IT 0582
I am going to share one of the business requirements which I have experienced, I hope this business scenario is common for most of the Indian clients.
Client having Washing Allowance wage component in monthly regular salary is stored in Infotype 0008. The allowance amount is fixed @ Rs.1000/- every month , No matter of employee’s grade and level. In Form 16 Rs.12000/ -per annum should be exempted under Sec 10.
Create Washing Allowance by copying Wage Type M2SF using T-Code OH11 or SPRO. I have created wage type value 1040 stored in Info type 0008.
Please find below Wage Type 1040 Processing / Cumulation / Evaluation Classes
We need to create Tax code for this to get the exemptions under Section 10. There is no standard Tax code in SAP for washing allowance . So either we have to create Z tax code or we can use SEXM Generic tax exemption which is a standard Tax code. Currently I have taken standard Tax code SEXM for Washing Allowance.
Tax codes for Tax exemption :
Please find below WT 1020 tax type as Tax exemption is Limit based 12000 per Annual
By creating above configuration steps we don’t get the exemption amount in Form 16, because of the Processing/ Cumulation / Evaluation classes
defined for wage type 1040.
So we need to create another Wage type 9999 with required of Processing/ Cumulation / Evaluation classes and PCR to move the Exemption amount
into /130 wage type.
Create another Wage type 9999 by copying MCAX Cust. Sp. Annual Exempt. Using OH11 and store in 40EX Tech Exemption wage types.
Please find below WT 9999 tax type as Tax exemption is rule based frequency Annual without any amount in Exmpt it using same Tax code SEXM.
Once we have created wage type, then we need to writer PCR and insert the same in Payroll Schema ZN00 sub schema ZNN1 Gross to net calculation.
Rule ZNLR Washing allowance Exemptions rule moving the Value
Once we have created wage type,& PCR, insert the same in Payroll Schema ZN00 sub schema ZNN1 Gross to net calculation.
Maintain IT 0582 using Tax code SEXM
Please find below exempted amount under sec 10 in Form 16
There may be some other ways to map this requirement. But I am sure this is the better way to map this requirement.