Go to Salary Components under the Payroll section, then open the Custom Earnings tab. This is where every custom earning your company has created is listed.

Click New Custom Earning. On this first step, enter a Name and Description, choose an Earning Type from the dropdown, and pick a Pay Type: Fixed, Variable, or Fixed Scheduled Pay. The Tax Deduction Preference only applies to Variable and Fixed Scheduled Pay earnings, so pick one of those if you want to set it now.

On the next step, turn on Is it a taxable component. If the earning's Pay Type is Variable or Fixed Scheduled Pay, a new Tax Deduction Preference choice appears, defaulted to Deduct tax in the same payroll:

If the Pay Type is Fixed instead, or the Earning Type is HRA, the choice is disabled and always behaves as "subsequent payrolls"; a tooltip on the disabled control explains why. (HRA tax works the same way; see how to create an HRA Type Earning for that component specifically.) Turning the taxable switch off removes the choice entirely and the row disappears, as it does if you are creating a non-taxable custom earning.

On the Summary step, the Tax Deduction Preference row shows which option you chose. Check it along with the rest of the summary, then click Create.

To change the preference later, go back to Custom Earnings, find the earning in the list and click the edit icon next to it. In the edit dialog, the same Tax Deduction Preference choice appears under Is it a taxable component whenever the earning is taxable and its Pay Type is Variable or Fixed Scheduled Pay. Pick the option you want and click Update. Only the fields you changed are sent, so if the preference is the only thing you changed, only it is updated.