First navigate to the settings.

Define the fiscal year in the settings.

After this add Tax Slabs in the settings.

Here define all tax slabs for the current Fiscal Year described by the Government.

In the Payroll Module create Salary Rules for Tax.

In the Amount Type select Python Code

And The below code to it

gross = categories.BASIC + categories.ALW 

medical = contract.wage * 0.10

result = contract.get_tax_deduction_amount(payslip, gross, medical, True)

Gross is gross amount (Add formula how you calculate Your gross)

Medical is medical amount (Add formula how you calculate Your medical)

Result is a function that returns tax amount, in which payslip is the current payslip, gross(gross amount), medical(medical amount) and this True means tax calculation without medical amount, if it’s  False  it means tax calculation with medical amount.

Then Add this rule to the salary structure where you want to calculate the tax for Employees

Then there is a check in each employee’s contract whether You want to calculate tax automatically or not.

Now if any employee comes in the middle of the Fiscal Year then in his/her contract two fields will be filled, previous months tax paid in the current fiscal year and the average of previous months salaries for the current fiscal year, these fields are mandatory if previously tax paid else it would be empty.

Now when any payslip is computed then the tax will be automatically calculated along with above configurations.

This is how tax will be calculated on payslips for each employee if tax automation is checked in the respective contract of that employee.