Payroll Tax in India

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Payroll tax is one of the important concepts in taxation. Payroll tax comprises of 2 types of taxes. The Payroll tax may follow a fixed rate format or the rate may be directly proportional to the income or wage of the employee.

Why was Payroll tax introduced

The incentive scheme under the Payroll Tax was introduced in order to aid the growth of the business sector which in turn would provide to the factor of employment. The incentive scheme under the Payroll Tax facilitate the provision of rebate which is paid by the employer for his employees.

The Payroll tax incentive scheme aids

  • To help gear up the business in the initial years of its functioning
  • To help the businesses which are shifting their location
  • To help those businesses that are going through a process of expanding its payroll and undertaking the liability of the payment of the payroll taxes
  • The scheme is not applicable for the group of employers or a single employer who has been liable for the previous year's payroll taxes

Payroll tax system in different countries

  • Australia: The Payroll Tax in Australia is a particular tax which paid to the government by the employers of the different states and territories. The payroll tax is not deducted from the employee. The government of Australia collects a single tax withholding, i.e. Pay-As-You-Go (PAYG) which is imposed mainly one medicare.
  • United Kingdom: The payroll tax in United Kingdom the contributions to the Employees National Insurance and the income tax for the employees are the types of payroll tax.
  • United States of America: Under the payroll tax in United States, the employers have to withhold half the tax on medicare and half the tax on social security tax along with the federal income tax.
In some parts of the United States, the employers are supposed to withhold the state income tax or income tax pertaining to cities. The employers in United States are also supposed to pay Federal and State unemployment tax. Altogether, the share of the employer's and the employee's taxes on social security and medicare are called FICA tax. The FICA taxes comprises of the medicare and social security taxes which are supposed to be withheld from the income or wage of the employee. The employer is supposed to contribute matching FICA tax for the employees.

Last Updated on July 3, 2015

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