When I asked many people which is the most
memorable day of there life and 50% people answered when I got my first salary
of my career and why not it should be. But I observed many people don’t know there salary structure,
many fresher as well as experienced people
after getting salary come to me with there salary slip and appointment letter
and ask siddharth please tell me what is my CTC,what is my gross salary, why I
got less salary, I am really confused.
HR just explained them once at the time of
joining and hand over the appointment letter and employee also doesn’t care and
after getting salary slip they get confused for what reason they got less salary.
Here will see in very simple language how
salary structure is designed.
Salary structure varies from company to
company but anonymously consist of five parts:
1. Gross Salary
2. Variable
3. CTC
4. Total deduction
5. Net Pay
2. Variable
3. CTC
4. Total deduction
5. Net Pay
1. Gross Salary: Gross Salary is nothing but
your fixed salary. Gross Pay is total pay for that period before deduction and
taxation.
a. Basic
Salary (40% of CTC as per rule)
b. DA (Dearance allowance)(20 % of Basic as per rule)
c. HRA (50% of basic or 40% of basic as per rule)
d. Medical reimbursement (1250 pm as per rule)
e. LTA (depends on company norms)
f. Special allowance or City compensatory allowance
e. Food coupon (depends on company norms)
g .Conveyance or Transport allowance(800 pm as per rule)
h. Education allowance (200 pm as per rule)
b. DA (Dearance allowance)(20 % of Basic as per rule)
c. HRA (50% of basic or 40% of basic as per rule)
d. Medical reimbursement (1250 pm as per rule)
e. LTA (depends on company norms)
f. Special allowance or City compensatory allowance
e. Food coupon (depends on company norms)
g .Conveyance or Transport allowance(800 pm as per rule)
h. Education allowance (200 pm as per rule)
2. Variable: Variable means extra salary
apart from gross given by company . It consists
of following components
a. Performance based bonus (8.33 to 20% of gross as per rule)
b. Incentives (depends on company norms)
c. Employer’s contribution to PF A/C (13.61% of basic as per rule)
d. Employer’s contribution to ESIC A/C (4.75% of basic as per rule)
e. Mediclaim (depends on company norms)
f. Gratuity (depends on company norms)
3.CTC: CTC is nothing but your gross plus variable. When people go for an interview many times get confused between gross salary and CTC
so always remember Gross plus variable will give you CTC
of following components
a. Performance based bonus (8.33 to 20% of gross as per rule)
b. Incentives (depends on company norms)
c. Employer’s contribution to PF A/C (13.61% of basic as per rule)
d. Employer’s contribution to ESIC A/C (4.75% of basic as per rule)
e. Mediclaim (depends on company norms)
f. Gratuity (depends on company norms)
3.CTC: CTC is nothing but your gross plus variable. When people go for an interview many times get confused between gross salary and CTC
so always remember Gross plus variable will give you CTC
4. Total deduction: Now total deduction means
deduction happening from employee’s pocket. It contains
a. Employees contribution to PF (12% of basic as per rule)
b. Employees contribution to ESIC (1.75% of basic as per rule)
c. Income Tax means TDS (As per income tax rules)
d. Professional Tax (As per income tax rules)
a. Employees contribution to PF (12% of basic as per rule)
b. Employees contribution to ESIC (1.75% of basic as per rule)
c. Income Tax means TDS (As per income tax rules)
d. Professional Tax (As per income tax rules)
5. Net Pay : Net pay is payment received
after total deduction from gross salary.It directly gets credited
into your account.
Example,Mr.X working with a Pvt.firm and has CTC is 4.75
LPA now will design his salary structure
Components
|
Per
month
|
Per
annum
|
Basic
Salary
|
14000
|
168000
|
House
Rent Allowance
|
7000
|
84000
|
Transport
Allowance
|
800
|
9600
|
Medical
Reimbursement
|
1250
|
15000
|
Education
Allowance
|
200
|
2400
|
Special
Allowance
|
9570
|
114840
|
Meal
Coupon
|
1100
|
13200
|
LTA
|
1080
|
12960
|
Gross
Salary
|
35000
|
420000
|
Bonus
|
2917
|
35004
|
E.R.
contribution to PF
|
1680
|
20160
|
CTC
|
39596
|
475152
|
Now will see few allowances each of gross in
detail how actually calculate to reduce the tax liability:
- Allowances/ Reimbursements- Allowances are normally paid irrespective of the employee actually incurring them. These are fully taxable if no bills are provided. However, if the expenses are incurred actually and bills provided, they are not taxable up to a specified limit under each head.
- Conveyance: For conveyance, up to Rs.800 per month is allowed as deduction without providing any bills.
- Medical Allowance: Bills have to be provided; up to Rs.15,000 per annum is allowed as deduction. This can be claimed for self, spouse, children, parents and siblings who are dependent on the assessee.
- Leave and Travel Allowance:2 trips in a block of 4 years is allowed and only travel within India can be claimed as deduction. So unfortunately you won't be able to claim for those Myrtle beach flights! It can be claimed for self, spouse, children, parents but only if the employee (assessee) is travelling along with them. There is no maximum limit on this, but the unutilized amount will be paid once the block is completed (after deducting taxes).
- Education Allowance: An amount of up to Rs.2,400 per annum is tax-free.
- Qualification Allowance: An amount of Rs.24,000 per annum is tax-free.
- Training Allowance: An amount of up to Rs.14,000 per annum is tax-free if the employee provides relevant bills.
- Telephone Allowance: An amount of Rs.12,000 per annum is tax free if the phone is used for official purposes and bills submitted.
- HRA: House Rent Allowance can be claimed if one lives in a rented premises and the rent exceeds 10% of the salary. The actual HRA exempted from tax is least of the following:
- The actual amount of HRA received.
- 40% of salary. This increases to 50% if you are renting out the house in Delhi, Mumbai, Chennai or Kolkata
- Rent paid minus 10% of salary (basic component + dearness allowance)
- Salary for the purpose of HRA means: Basic + D.A (only if it is forming part of salary for retirement benefits) + commission (if it’s a fixed % of sales turnover).
Dear Sir,
ReplyDeleteYou are mentioned the all of the percentages in Gross Salary, Variable as per the rule. But, I am not having a good idea about that. So, please share the rules which was considered that.
Regards,
Phani.
Is there a rule /Act for HRA ?
ReplyDeletethanks
cp
sir , i am geting 14000 salary , i wanted to knw what wiil be my ctc, basic pay, hra, conveyence, tax, lta etc,,
ReplyDeletesir, I am starting my career in Eastern Bharat Tele Co., may salary is 12000 & I want to know that what will be may DA & HRA & net salary.
ReplyDeleteTry...
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Sir, You have mentioned that basic salary is 40 % of CTC as per rule. Can you please send me the exact name of the rule and its details(might be link to any government site which have documentation about it.)
ReplyDeleteIn My Current company, the basic salary is 60% of CTC. Can you please help me out and guide.
Thanks in Advance
This comment has been removed by a blog administrator.
ReplyDeletecan Basic salary be more / less than 40%
ReplyDeleteHi
ReplyDeleteMy salary is 10000 pl Confirm By Basic salary
how to calculate Basic Salary
Deleteyour salary is 10000 base salary should be 40% from ur CTC
Delete10000*40%= 4000 monthly
120000*40= 48000 Annually
Naveen
my in hand salary 16000 plz give me break up with all contri bution
ReplyDeleteplz tell me my salary contribution of in hand salary 16000k pm
ReplyDeletemy ctc is 318000 can you pl calculate my sal/m and basic pay, hra, conveyence, spcial allowance, Medical allowance and pl mention their %
ReplyDeleteDear payroll Experts kindly suggest Below Salary STRUCTURE IS RIGHR OR WORING
ReplyDeleteCTC Breakup for - DARSHANA A. THAWALI Work Experience FRESHER
Particular Value Basis PER MONTH PER ANNUM
Amount Take Home "Amount
" Take Home Annual Saving
Basic Min Wage Basic+DA 3900 3900 46800 46800
HRA 5% Basic+DA 195 195 2340 2340
Conveyance Fixed 1600 1600 19200 19200
Canteen Fixed 300 300 3600 3600
Medical Allowance/ In-lieu of ESIC 8.33% Basic+DA 325 325 3898 3898
Special Allowance 4095 4095 49139 49139
Salary 10415 124978
Employer Contribution to PF 12.00% Basic+DA 468 5616 5616
P.F/In-lieu of PF 12.00% Basic+DA 468 5616 5616
Welfare Cost Fixed 572 6864 6864
Annualized Bonus - Apr To Mar Payable 10.00% Basic 390 4680 4680
Gratuity as per payment of gratuity Act 4.80% Basic 187 2246 2246
Total Gross Salary Per Month 12,500 10,415 150,000 124,978 25,022
Designation Offered EXECUTIVE TRAINEE
Date of joining 17-Mar-16 Department COMMERCIAL : FINANCE & COMMERCE
Any Other Benefit Discussed & Agreed - NIL
Hi the information is so helpful. Can you please tell me is the PF Employer share is taxable or not?
ReplyDeleteShould we deduct TDS on PF employer share too? please respond at your earliest.
Basic : 40% on Gross salary not on CTC
ReplyDeletehello sir i work in pvt ltd company. rules for salary 26 days ya 30 days.
ReplyDeletemy salary ex. 15000. 15000/26=576 per days. 15000/30=500. rules for inform me.
please sir inform me per day salary rules for government.
ReplyDeletehi... thanks for a resourceful information, but i need to know what is name of act that defines salary breakup. i mean i need a particular name for that act.
ReplyDeletethanks in advance.
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Nice to here about it. Can you please look into salary format which are provided in Payslip Templates?
DeleteGreat information post.Thanks for share.
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YOU ARE REALLY MISLEADING PEOPLE BY SAYING AS PER RULE... WHAT A CRAP.. USUAL POOR HR CHEATING TACTICS.. WHY ARR YOU NOT SHARING THE RULE IF THERE IS ANY..
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