Flexible Benefits
Set up and manage Flexi Benefit Plan (FBP) components in Payroll to give employees tax-friendly compensation choices.
The Flexi Component Library in Payroll lets you define and manage Flexible Benefit Plan (FBP) components. These components allow employees to allocate a portion of their CTC toward tax-friendly benefits such as Meal Allowance, Car Lease Reimbursement, Employer NPS Contribution and other custom benefits.
Each flexi component is configured once at the organisation level and can then be added to an employee's compensation. Employees can either declare an amount of their choice (within the limit) or have the maximum eligible amount auto-applied, depending on how the component is set up.
To open the Flexi Component Library:
- Navigate to Settings → Component Library.
- In the Component Library section, find Flexible Benefits and click Edit.
- The Flexi component library page opens, listing all flexi benefit components configured for your organisation.
Use this flow to add a new flexi benefit such as a custom allowance or reimbursement that your organisation offers.
To create a new flexi component:
- On the Flexi component library page, click Create New.
- Fill in the Basic Details:
- Component name: internal name used for payroll processing (must be unique).
- Display name: the name visible to employees in payslips and the FBP declaration screen.
- Component description: a short summary of what this benefit covers.
- Set the Gross Salary Inclusion:
- Add to Gross Salary: the benefit is included in gross salary calculation and eligible exemptions.
- Exclude from Gross Salary Calculation: the component is not included in the gross salary calculation.
- Choose the Benefit Type:
- Cash Benefit: the benefit is paid directly to the employee as part of their salary.
- Non-Cash Benefit: the benefit is provided in a non-monetary form (for example, meal card, NPS contribution, gift voucher) and is not part of the cash payout.
- Click Next to configure the Amount Details.
- Set the Declaration Method:
- Enable Declaration: employees can declare an amount of their choice within the limit.
- Auto-Apply Full Amount: the maximum eligible amount is applied automatically without employee action.
- Set the Benefit Amount:
- Set Maximum Limit: define a maximum value; employees can declare any value between 0 and the maximum.
- Multiple Values List: define a list of values that employees pick a single option from in a dropdown.
- Set the Max limit as either a Fixed Amount (in ₹) or a % of Basic.
- Click Next to configure Tax & others details:
- Taxability: toggle Tax exempted in Old Regime and Tax exempted in New Regime based on the applicable rules.
- Exemption under Section: select the Income Tax Section under which this benefit is exempt (for example, Section 80CCD(2) for Employer NPS).
- Proration & Arrears: enable Component will be prorated to adjust the amount based on the employee's working period within the pay cycle. Arrear calculation is Coming soon.
- Unclaimed amount:
- Hold amount: hold the unclaimed amount till March of the financial year.
- Release amount: release the unclaimed amount every payroll month as taxable income.
- Click Next to Review the configuration:
- Verify the Basic, Amount and Taxability details.
- Use the inline Edit links to go back and update any section.
- Click Create Component to add the new flexi benefit to your library.
The new component is now available to be added to an active employee's compensation.
Employer NPS is a mandated, predefined flexi component that ships with every Payroll account. It represents the employer's contribution to the National Pension System and is tax exempt under Section 80CCD(2) of the Income Tax Act, in both the Old and New regimes, up to 14% of Basic salary.
Watch Out!
This component ships in a Disabled state. You must enable it before it can be added to an active employee's compensation.
The Employer NPS Contribution component comes preconfigured with the following settings. The Component name and Benefit type cannot be modified, but other fields can be updated through the Modify flow.
Enable the component before assigning it to an employee's compensation.
- On the Flexi component library page, locate the Employer NPS row (marked Disabled) and hover over it.
- Click View Details.
- In the side panel, review the preconfigured Basic, Amount and Tax details, then click Enable.
- A confirmation dialog appears: Once enabled, you can add the component to an active employee's compensation. Click Enable Now to confirm.
Employer NPS is now active and can be added to any active employee's compensation as part of their flexi benefits.
Disable the component to stop it from being assigned to new employees. Employees who already have Employer NPS in their compensation are not affected.
- On the Flexi component library page, hover over the Employer NPS row and click View Details.
- In the side panel, click Disable.
Watch Out!
A component that is currently part of an employee's compensation cannot be removed retrospectively by disabling it. Disabling only prevents the component from being added to future payroll.
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