Basic/HRA/CCA - Income Tax

Thanks a lot Shriya, but I want to know is there any legal specification for calculating the Basic and the HRA?

is it that the Basic should not be less that 35 % of the CTc? is it that the HRA has to be 25 % of the CTC?

this is what I want to know.

Hi Ayona,

As per your query, there is no such rule of BASIC that it should not less than 35%.


1.As a practice most of the companies follows that BASIC should be 35 % of CTC. It varies from company to company from 30%--50% of CTC.There is no hard and fast rule for that. The basic of mentioned monthly 30 k would be Rs.10,500/-.

2.As per Income tax law, HRA SHOULD BE OF 50% OF BASIC FOR METRO CITY AND 40% FOR NON METRO CITY.

3. City Compensotry allowance depends upon internal policy of the company and according to the classification of cities. Some companies give 20 % of ctc, some gives 10%. So it purely depends upon the co.


HOPE I HAVE ANSWERED YOUR QUERY

KATYANA

is there any law in Setting basic say my concerns basic is 60% if i thought of reducing it means is it possible

There is no law relating to fixing Basic salary, HRA etc. A company can decide on that. Normally, the basic salary comes first. It is from this basic salary that HRA, Dearness Allowance etc are calculated. Normally, DA and HRA will be certain percentage of basic salary. Similarly, CCA will be paid. The aggregate of all these will be the gross salary. It is not like taking the gross first and reworking the process reverse. A company should have a policy by which basic salary of different categories of employment will be fixed. And there will be a policy on Dearness Allowance, say DA variable according to cost of living of the area (which will be notified by the area statistical department) Similarly, fix a particular percentage of basic as HRA and a sum as CCA. Please try that.

One important thing. There is no labour enactment making it obligatory for employer to have a split up pattern of salary. You can pay consolidated salary. The only thing is that whereever reference to salary is made( say, for Bonus calculation, PF calculation or Gratuity calculation), the whole (consolidated) sum will be regarded as salary which will increase the burden of employer. Similarly for employees tax liability it is better to separate salary(basic+ DA) from HRA and CCA.

Regards,

Madhu.T.K

Hi vasantpriya, as i stated earlier that there is no such law for basic. SO IF U WANT U CAN TAKE THAT PERCENTAGE. KATYANA

Hi , Please find the attached sheet of calculation of salary and deduction. I may help you ST

Attached Files

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salary_break_up_calculator_878.xls (21.5 KB, 1668 views)

Hi,

One point is missed out by all.

If I am right, the concern is, can the basic pay be reduced from existing 60% of CTC to anyway as desired? Is there is any statutory rule to adhere to.

As mentioned by all there is no statutory rule that says that the basic pay is to be calculated to a certain percentage of the CTC. However, normally all companies paying 30 - 50 % of CTC as basic pay.
50% of Basic as HRA normally (This is to give maximum benefit to employees to avail HRA exemption) Conveyance either a fixed comp of Rs.800/- or a % of basic pay. The rest of the ctc after inclusion of DA if applicable will be paid as Special pay(this is actually an adjustment comp).

However, if one plans to change sal structure, it can be done only over a period of time and not suddenly. ie, statutorily one's basic pay cannot be reduced. ie If I am paid say, 3000 per month, it cannot be reduced at any point of time. Normally we change the salary structure during salary increase/revision. Keep basic pay constant until the basic pay of revised salary equates to the new salary structure. For new offers, one can follow new salary structure.

Hi,

One point is missed out by all.

If I am right, the concern is, can the basic pay be reduced from existing 60% of CTC to anyway as desired? Is there is any statutory rule to adhere to.

As mentioned by all there is no statutory rule that says that the basic pay is to be calculated to a certain percentage of the CTC. However, normally all companies paying 30 - 50 % of CTC as basic pay.
50% of Basic as HRA normally (This is to give maximum benefit to employees to avail HRA exemption) Conveyance either a fixed comp of Rs.800/- or a % of basic pay. The rest of the ctc after inclusion of DA if applicable will be paid as Special pay(this is actually an adjustment comp).

However, if one plans to change sal structure, it can be done only over a period of time and not suddenly. ie, statutorily one's basic pay cannot be reduced. ie If I am paid say, 3000 per month, it cannot be reduced at any point of time. Normally we change the salary structure during salary increase/revision. Keep basic pay constant until the basic pay of revised salary equates to the new salary structure. For new offers, one can follow new salary structure.