Human resources headache of 2 tax systems

Payroll management could become an administrative nightmare for large employers as the new tax regime enters into force. Experts said organizations should strive to advise on the new tax regime before April 1 of this year.

Employees whose salaries fall into the respective tax tranches where the tax reduction benefit is offered, earning between Rs 5 lakh and Rs 15 lakh per year, must decide the path they wish to choose. If they choose to continue with the existing tax regime (let's call it plan 'A') and decide to claim deductions from their investments in tax-saving schemes as they do each year, then the organization would not make any changes in the way their taxes are calculated.

However, if they opt for the new tax regime (for example, Plan B), they must declare this intention to their employers before March 31 of this year. Once employees opt for the new tax regime, they cannot return to the previous one. For employees who opt for Plan B, it will be easier since taxes will be deducted in advance from the employees' salary.

Aditya Birla Group The human resources director said: “Employee compensation will continue in the same way. However, we will have to advise employees in both fiscal ways, explaining the implications and possibly creating a help line that can help employees with any type of consultation. Once employees voluntarily declare the fiscal route they would like to opt for, the organization will format and calculate it accordingly. ”

Live plus The PwC (personal tax) partner said that moving to the new optional tax regime could be a great administrative exercise for human resources and payroll departments of organizations that will have to find out how they will manage the alternative payroll if they want to offer this option to the employees in the retention stage.

“Employer organisations may have to explain the changes in the tax regime and related impact which can vary from case to case. Suddenly, for employees who opt for the new regime, it would mean giving up on a whole bunch of exemptions they earlier sought, such as LTA, HRA. Depending on what they were claiming earlier and are now foregoing, some may even end up paying plus . Perhaps, a familiarisation process can be undertaken for the employees, with the help of tax experts,” said Sengupta.

and young employees, with incomes below Rs 15 lakh, could be the objective of Plan B, while most employees in the middle and upper ranks could follow the previous tax regime. What is absolutely clear is that it will be added to the paperwork of most companies with the finance departments competing to provide thousands of employees with options on how the two schemes work.