How to add NPS in the salary structure

If your organization contributes to the National Pension System (NPS) on behalf of employees, you can help employees claim a tax deduction under Section 80CCD(2) of the Income Tax Act. This section allows a deduction of up to 10% of the employee’s salary for employer contributions to NPS.

Enable the NPS Component

1. Go to the Payroll menu.

2. Under Settings, click Pay Groups.

3. Select the relevant pay group.

4. Click the Configure icon next to the pay group.

   

5. In the new window, click Salary Components.

6. Under Recurring Components, use the search bar to find NPS.

7. Once you see the NPS component, click the Edit icon next to it.

   

8. Toggle the switch to Enable the component.

9. Click Update.

   

Add NPS to the Salary Structure

1. Go back to the Payroll menu.

2. Under Settings, select Pay Groups again.

3. Choose the same pay group and click the Configure icon.

4. 

5. Click Salary Structures.

6. Click Edit Salary Structure.

   

7. On the next screen, click +Add Component.

   

8. In the overlay window, search for NPS.

9. Check the box next to the NPS component.

10. Click Add Component.

    

Configure the Formula for NPS Calculation

1. In the Edit Salary Structure window, locate the newly added NPS component.

2. Under Formula for value / fixed value, click the Edit icon.

3. Enter the appropriate calculation formula for employer NPS contribution.

4. Click Update to save.