Can any one clarify this doubt.
In a company, based on category there is different Pay Structures.
For e.g. to a Technical Engineer whose Monthly Gross is Rs.25,000/-,
his pay structure is as follows:-
Basic Pay (40% of Gross ) Rs.10,000
Technical Pay (80% of Basic) Rs. 8,000
HRA (30% of Basic) Rs. 3,000
City Allowance (20% of Basic ) Rs. 2,000
Conveyance Allowance (20% of Basic) Rs. 2,000
Total Monthly Gross Pay Rs. 25,000
Whereas for a Non – Technical Guy for the same monthly gross, the pay structure is as follows:-
Basic Pay(Gross*100/170) Rs.14,705
HRA (30% of Basic) Rs. 4,411
City Allowance (20% of Basic ) Rs. 2,942
Conveyance Allowance (20% of Basic) Rs. 2,942
Total Monthly Gross Pay Rs. 25,000
Whereas if we calculate the Income tax,(HRA Part alone)suppose let us presume that both are actually paying Rs.3000/- as monthly rent, the technical guy will be paying less Income tax than that of the non-technical guy.
The Reason is the technical Guy is getting a rebate of Rs,2000 (from his rent of Rs.3,000 less a sum of Rs.1000 (i.e. 10% of Basic)), whereas the non technical guy is getting a rebate of only Rs.1530 (from his rent of Rs.3,000 less a sum of Rs.1470 (10% of his Basic).
A clear difference of Rs.470 per month. In a year it is Rs.5,640.
Suppose we further presume that both are having all other type of IT exemptions for a equal amount of Rs.1,00,000/- u/s 80C and Rs.15,000/- u/s 80D and after that comes under the 10 % bracket of the Income Tax.
In that case due to this HRA factor alone this non –technical guy will be naturally paying a net Income Tax of Rs.581 (ie. Rs.564 + Rs.17 as 3% cess) more than that of the technical guy.
Kindly note that this is in the case of Monthly Gross of Rs.25,000/- If the gross is more then naturally the IT also will be more for the non-technical guy. If it is 20% or 30 % bracket it will be further more.
When asked for clarification about Gross*100/170 for the non technical guy, the company’s reply is that it is company auditor’s (CA’s) idea. Based on his idea only it was differently bifurcated for both the guys. Due to his idea the company is also benefited. I don’t know which way company is benefited.
When it was suggested that same like technical allowance for non-technical guys, to use the same formula and introduce like non-technical allowance or executive allowance, special allowance etc. the reply is that the Auditor is not agreeing and the company will be looser by doing so. I don’t know how the company will be looser.
One thing is sure. In the case of gratuity calculation, the non-technical guy if continue to serve for five years will be getting more gratuity than that of the same gross salary technical guy, because of having more basic than that of the Technical Guy. Till such time the non-technical guy has to pay more Income - Tax. No other go for the poor guy.
Is there any solution for this.
Regards,
S.Kumarasubramanian
From India, Madras
1In a company, based on category there is different Pay Structures.
For e.g. to a Technical Engineer whose Monthly Gross is Rs.25,000/-,
his pay structure is as follows:-
Basic Pay (40% of Gross ) Rs.10,000
Technical Pay (80% of Basic) Rs. 8,000
HRA (30% of Basic) Rs. 3,000
City Allowance (20% of Basic ) Rs. 2,000
Conveyance Allowance (20% of Basic) Rs. 2,000
Total Monthly Gross Pay Rs. 25,000
Whereas for a Non – Technical Guy for the same monthly gross, the pay structure is as follows:-
Basic Pay(Gross*100/170) Rs.14,705
HRA (30% of Basic) Rs. 4,411
City Allowance (20% of Basic ) Rs. 2,942
Conveyance Allowance (20% of Basic) Rs. 2,942
Total Monthly Gross Pay Rs. 25,000
Whereas if we calculate the Income tax,(HRA Part alone)suppose let us presume that both are actually paying Rs.3000/- as monthly rent, the technical guy will be paying less Income tax than that of the non-technical guy.
The Reason is the technical Guy is getting a rebate of Rs,2000 (from his rent of Rs.3,000 less a sum of Rs.1000 (i.e. 10% of Basic)), whereas the non technical guy is getting a rebate of only Rs.1530 (from his rent of Rs.3,000 less a sum of Rs.1470 (10% of his Basic).
A clear difference of Rs.470 per month. In a year it is Rs.5,640.
Suppose we further presume that both are having all other type of IT exemptions for a equal amount of Rs.1,00,000/- u/s 80C and Rs.15,000/- u/s 80D and after that comes under the 10 % bracket of the Income Tax.
In that case due to this HRA factor alone this non –technical guy will be naturally paying a net Income Tax of Rs.581 (ie. Rs.564 + Rs.17 as 3% cess) more than that of the technical guy.
Kindly note that this is in the case of Monthly Gross of Rs.25,000/- If the gross is more then naturally the IT also will be more for the non-technical guy. If it is 20% or 30 % bracket it will be further more.
When asked for clarification about Gross*100/170 for the non technical guy, the company’s reply is that it is company auditor’s (CA’s) idea. Based on his idea only it was differently bifurcated for both the guys. Due to his idea the company is also benefited. I don’t know which way company is benefited.
When it was suggested that same like technical allowance for non-technical guys, to use the same formula and introduce like non-technical allowance or executive allowance, special allowance etc. the reply is that the Auditor is not agreeing and the company will be looser by doing so. I don’t know how the company will be looser.
One thing is sure. In the case of gratuity calculation, the non-technical guy if continue to serve for five years will be getting more gratuity than that of the same gross salary technical guy, because of having more basic than that of the Technical Guy. Till such time the non-technical guy has to pay more Income - Tax. No other go for the poor guy.
Is there any solution for this.
Regards,
S.Kumarasubramanian
From India, Madras
30 views and no replies. Is it so complicated? If you guys are not understanding and replying how will the management will realise and take necessary corrective action to rectify this issue raised by me.
Regards,
S.Kumarasubramanian
From India, Madras
Regards,
S.Kumarasubramanian
From India, Madras
Dear friend, Enclosed please find the excel attachment as desired by you. Regards, S.Kumarasubramanian
From India, Madras
From India, Madras
Hope that now I will receive more replies because my problem is explained in Excel format. Regards, S.Kumarasubramanian
From India, Madras
From India, Madras
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Salary-Note.doc
SALARY SHEET CALCULATION.xls