Some of the salary break up components are described below:
1.1 Salary Structure
Salary structure components are determined by contemporary industry practices and statutory requirements. Besides Basic Salary, other salary components include:
· House Rent Allowance (HRA)
· Medical Benefits
· Provident Fund (PF)
· Leave Travel Assistance (LTA)
· Conveyance Allowance
· Performance-based Pay
· Other Allowance
Each of the components is explained in more detail below.
1.2 House Rent Allowance (HRA)
If you are renting the house in which you are living, you may be eligible to claim tax exemption in respect of HRA up to certain limits on submission of rent receipts.
1.3 Medical Benefits
Employees may claim their Medical Benefits as medical reimbursement (which is tax free up to certain limits).
1.4 Provident Fund (PF)
Employees can become a member of PF from their date of joining. On becoming a member, an employee must contribute 12% of his or her Basic Salary to the PF on a monthly basis, and the company will contribute an equal amount. (Employees have the option to contribute more subject to PF rules; however, the company limits its contribution to 12% per employee.) Other rules and regulations governing PF shall be in accordance with the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, and PF exemption from tax and other tax benefits shall be as per income tax law.
PF is optional for any employee whose Basic Salary is greater than Rs. 6,500 per month.
1.5 Leave Travel Assistance (LTA)
Employees may claim LTA after completion of 11 months of service with the company or at the end of their first financial year with the company, whichever is earlier.
1.6 Conveyance Allowance
Conveyance Allowance is paid to help employees meet the cost of commuting between home and office. The amount is determined based on the company’s Conveyance Allowance Policy which is available with HR, and is taxable as per income tax law.
1.7 Performance-based Pay
Most of the company believes that compensation should be linked to performance, and the Performance-based Pay component is one way in which the company seeks to do this. Through Performance-based Pay, employees are rewarded on achievement of predefined goals and objectives, which may be on an individual, team or corporate level, or a combination of these. In administering the company’s various Performance-based Pay initiatives, transparency and fairness are the guiding principles.
Performance-based Pay is taxable.
1.8 Other Allowance
At times, due to special circumstances, a fixed monthly allowance may be added to an employee’s salary. Generally, it will be withdrawn once such circumstances cease to exist, unless management chooses to withdraw it sooner, at its discretion. As such, Other Allowance is temporary in nature and not a fixed increase, and will not be considered a part of salary when calculating increments.
Other Allowance is taxable.
1.9 Incentive Policies
The company has various incentive policies in effect from time to time. Many are applicable to specific departments, while others are more general in nature.
Incentive is taxable.
I am also attaching the annexure (salary break up) format of cost to company for your reference.
Thanks & Best Regards
Prem Singh Rawat
13th March 2009 From India, Delhi
16th March 2009 From India, Bangalore