Checklist for financial year-end payroll process

Payroll managers and HR professionals need to get ready for a significant yearly task as payroll year-end approaches. For companies of all sizes, the Indian payroll year-end procedure is essential from the standpoint of governance and compliance. HR managers have a lot on their plate at the end of a hectic fiscal year. However, the payroll management procedure is not at all simple. Managers may, however, make sure they keep on top of things towards the end of the year by using certain useful strategies. We’ve put up a year-end payroll checklist in this blog post so you may have a seamless finish to the current fiscal year and a fresh start to the next.

#1:- Tax Returns and Filing

Without submitting your annual reports for the taxes you collected and the deductions you made from your employees’ paychecks cheques, the fiscal year cannot be concluded. The employer would deduct TDS when processing the monthly salary. All organisations are required to file Form 24Q every quarter and deposit the tax. Section 192 allows you to deduct TDS from employee payments. Form 24Q consists of two sections: Annexure 1 and Annexure 2. Annexure 1 must be turned in every quarter. Annexure 2, which contains the total tax liabilities of all of your employees for that fiscal year, can only be provided for the most recent quarter.

Verify that all of the prior quarters—April through June, July through September, and October through December—have been filed and are accurate.

Prepare your final TDS computations for the last quarter, January through March. Don’t forget that the deadline for filing Q4 is May 31. Think about situations where a recalculation is necessary if the real evidence and the employees’ tax declarations do not match.

#2:- Issuing Form 16

On behalf of the employees, the employer issues Form 16, which is a certificate of tax deduction at source. These certificates offer details about TDS for various deductor-deductee transactions. These certifications must be given to every taxpayer. The deadline for generating Form 16 for employees for a financial year is June 15th. Employees should file their tax returns using Form 16 in the same manner as TDS returns are filed using Form 24Q.

#3:- Deductions on statutory items

Organisations have until March 31st to close out costs such as Provident Fund, Professional Tax, ESI, Labour Welfare Fund (LWF), reimbursements, etc. The employee contribution and the amount withdrawn by employers from their EPF must be paid each month. The yearly return is due on April 25. To close this before March 31st, make sure there are no pending concerns or anomalies.

All ESI-registered companies are required to submit their returns every two years. They must list every modification they made during the year at the conclusion. Additionally, they must turn in the amount of their biannual ESI contribution. Contributions can be made between April 1 and September 30 and October 1 and March 31. The closest branch office or ESIC regional commissioner must receive contributions. Each half-year, contributions must be submitted within 42 days after the conclusion of the period. Thus, make sure there are no lingering concerns or inconsistencies, and resolve this before March 31st.

It is your duty as an employer to withhold professional tax from workers under the laws of each Indian state. State-specific laws, however, place restrictions on the precise amount and timing of the deduction. Every month, PT returns need to be submitted. All that needs to be done at year’s end is to balance the returns that were submitted all year. Professional tax (PT) does not follow the fiscal year (FY) as income tax does, and it is not applicable in all states. Organizations are required to regularly deduct and deposit PT. It is important to complete PT computation and accounting by March 31 for payroll purposes.

The Labour Welfare Fund (LWF) is an amount that organisations pay once. LWF is state-specific, just as PT, and organisations are required to calculate and deposit this amount every year. LWF does not strictly adhere to FY in contrast to IncomeTax. It is important to complete LWF computation and accounting by March 31 for payroll accounting purposes.

#4:- Year-end tax-related norms 

Income tax proof collection is part of India’s year-end procedure. Employers are required to gather documentation attesting to the income tax savings that their employees have disclosed by March 31st. Employees who lack proper knowledge of income tax procedures are more likely to disregard investments and pay more in taxes over one or two months. Even smaller take-home pay from January to March can come from this.

Verifying if the declared amount and the investment-proof documents that were presented match is crucial. If they don’t match, recalculate the tax and make the appropriate deduction. Beginning in January, recalculate the income tax due based on the acquisition and verification of investment proof, and then make adjustments to deductions over the following two months. Employees should only be granted tax exemption once investment-proof documentation has been examined and verified. Additionally, stay informed on the most recent changes and directives issued by the Income Tax Department and other statutory bodies.