Creating an Earning Pay Head

To create an Earning Pay Head, Basic Salary, under Indirect Expenses:

Go to Gateway of Tally> Payroll Info. > Pay Heads> Create


1)Enter the Name of the Earning Pay Head.

2)Select Earnings for Employees as the Pay Head Type from the List of Pay Head Types.

3)Select the respective Pay Head Group Earnings from the list for the field Under.

4)Select Yes from the list if you want the Pay head to affect the net salary.

5)The Pay Head name entered in the Name field will appear in this field. You can change the same, if required. The name entered in this field will appear on the payslip.

6)Select Flat Rate from the List of Calculation Types.

7)Select the Calculation Period Type from the list.

8)Based on the Calculation Period Type, you can select and enter the details for Per Day Calculation Basis.

9)Select the Rounding Method from the list if applicable.

10)Accept to save the Pay Head.

Similarly, you can create Earning Pay Heads for HRA, Conveyance and so on..

Creating a Deduction Pay Head

To create a Deduction Pay Head, Professional Tax under Employees’ Statutory Deductions:

Go to Gateway of Tally> Payroll Info.> Pay Heads> Create

1)Enter the Name of the Deduction Pay Head.

2)Select the Pay Head Type from the List of Pay Head Types.

3)Select the Group from the List of Groups.

4)Select Yes from the list if you want the Pay Head to affect the net salary.

5)The Pay Head name entered in the Name field will appear in this field. You can change the same, if required. The name entered in this field will appear on the payslip.

6)Select the Calculation Type from the List of Calculation.

7)On selecting the calculation type to 'As Computed Value, a new field Calculation Period appears which will be set to Months automatically

8)Select On Current Earnings Total from the list to be Computed On.

9)Specify the Slab Rate.

10)Select the Rounding Method from the list if applicable.

11)Accept to save the Pay Head.

Similarly, you can create a Deduction Pay Head for Provident Fund and so on.

A Salary Payable account under the group Current Liabilities is used to credit the total of Net Payable salary of all employees. When salary is disbursed, this account is debited and Cash or Bank account is credited.

To create Salary Payable Pay Head under the group Indirect Expenses:

Go to Gateway of Tally> Payroll Info.> Pay Heads> Create





Creating Salary Payable Ledger

1)Enter the Name of the Pay Head

2)Select Not Applicable from the List of Pay Head Types

3)Select Current Liabilities from the list

4)Accept to save the Pay Head

Creating Gratuity Pay Head

To create a Pay Head Gratuity under Current Liabilities:

Go to Gateway of Tally> Payroll Info.> Pay Head> Create


1)Enter the Name of the Pay Head

2)Select Gratuity from the List of Pay Head Types

3)Enter the Slab Rate Details for Gratuity Calculation in the sub-screen



4)Select Current Liabilities from the list

5)Accept to save the Pay Head

Note: To use the Earning Pay Head for Gratuity calculation, set Use for Gratuity? field to Yes in the ledger creation screen (for Pay Heads such as Basic Salary, HRA, and so on, created under Indirect Expenses).

Enabling Payroll in Tally

To enable Payroll in Tally

Go to Gateway of Tally > F11: Features> Accounting Features

Set Maintain Payroll to Yes

You can set More than ONE Payroll / Cost Category to Yes if you wish to process payroll for multi group of Employees
Set Maintain Payroll to Yes
The new enhanced Payroll in Tally requires minimal effort for accurate processing. Setting up Pay Heads, Employee Group, Employees, Salary Details and Attendance/Production Type is now a simple process with Tally’s Four easy steps to generate a payslip.

Step 1
Create Pay Heads
The components of structured salary are created under Pay Head

Create the salary structure components in pay head. The Pay head creation in tally is very user friendly. Tally allows creating any complex type of pay head.

Step 2
Create Employee Masters
Create an Employee master. Enter the requisite Employee Details & Employee group by grouping employees under the function they perform; their department or designation.

Step 3
Create Salary Details
Create the applicable Salary Details for both Employee Groups as well as Individual Employees with earnings, deductions and basis of computation.

Step 4
Process Payroll and Generate the Payslip
Pass a Payroll voucher to enter all Earnings and Deductions in payroll transactions that are paid along with the Salary Payslip for all employees

Generate the Payslip that provides employee as well as attendance details, itemises each component of the employee’s earnings and deductions, and displays the net amount paid to him for a given pay period. It also provides information to the employee as to how the net amount was arrived at.

The Payroll Configuration can be enabled as shown below:

Gateway of Tally > F12: Configure > Payroll Configuration

In the above screen:

The option Show NI Number (for International companies only) and Show Statutory Details (for India/SAARC companies only) can be set to Yes to enter the NI details/ PF, ESI and PF PAN details in the Employee details form and print the same information in the Employee Payslip.

The options, Show Passport & Visa Details and Show Contract Details, should be set to Yes as shown, to display the Passport, Visa and Contract Details in the Expat Reports. If these options are set to No, then the Expat Reports menu will not be displayed under Payroll Reports. Some of the Information related to Employee passport such as Passport Number, Passport Expiry date, Visa Number, Visa Expiry date, Contract Start and Expiry dates will not be displayed at the creation of the Employee.