Our company is an IT Software Company and started operations only in the month of Dec 2009 as a subsidy of our parent Company in US.
Currently we have only 5 employees - 2 permanent employees and 3 as consultants. We are planning to increase our employees size to 30+ by 3rd Quarter. So, as PF is not applicable till an organization has 20 people, kindly let me know how to go about in designing the salary structure...
Also, as we work on JAVA/.NET/QA technologies, we have employees in the salary range of 8+lacs per annum. Please help me in designing a salary break up structure without PF component for the present scenario along with components with which the employee does not end up in paying much tax.

From India, Mumbai
Dear Lakshmi
Use the simple method:
8 Lacs (Divided by 12 = 66666)
Basic: 33333
HRA @50 of Basic: 16666
CCA @30 of Basic: 9999
Travel Allowance: 800
Total Gross: 60800
+ 1250 Medical Reimbursement (Tax Free) Subject to the production of bills
+ 3300 Meal Vouchers (Already it is tax exempted)
Grand total of CTC : 60800+1250+3300 = 66600
In case of married person Rs-200 as education allowance or use Personal Pay column in gross salary structure to adjust rest of amount.
Vishal Malik

From India, Delhi
Dear Lakshmi,

Greetings for the day!!!
pls check the below mentioned percentages for designing salary structure:
Basic = 50% of the salary in metro cities & 40% in non metro cities
HRA = 50% of the Basic salary
Conveyance = 800 per month
Medical Alloawance = 1250 per month
Education = It is based on employee grade
Performance commission = to balance off the gross
you can put Special allowance in your salary structure
and pf goes optional if your basic salary is equal to or more than 6500/- then its on the discreation of company to deduct the pf or not as pf contribution includes equal part from company side.

From India, New Delhi
Hi Kapil,
Thank you so much for your help.
Kindly let me know what is this Performance Commission and is this taxable? Also, for senior software engineers who are drawing a ctc of 8-12 lacs, is it feasible to mention education allowance?
How about Food Coupons component? To what extent it is taxable?
Special Allowance would be added.

From India, Mumbai
Dear Lakshmi,

Good Evening :)

Performance Commission is also known as Performance Bonus/Incentive. Contents of salary is purely depend upon your company policy means its on shoould be clearly mentioned in company policy that in which heads salary shall be bifurcated.

Every Income is Taxable and for exemption please go through Latest IT Laws and provisions

From India, New Delhi
Hi Kapil,
Thank you!!!
We cannot have this performance component as we already are thinking of going for Deferred Bonus structure. We would be implementing the same as in our US office, its been put into practice.
Also, if you can provide me the link or document that would clearly mention about the percentage and exemption part.
One more doubt- We would definitely like to add Telephone/mobile expenses, fuel expenses, car allowance, driver salary...
Can we provide telephone/mobile expense or fuel expense each as 5% of basic salary?
Thanks & Regards

From India, Mumbai
Dear Sirs, have any restriction of amount for Conveyance allowance, Medical Allowance, Education allowance for making salary structure. please suggest. Raj Pandey
From India, Nagpur
Hi Vishal,
Thank you!!
What is CCA? Is it City Compensatory Allowance and what is this allowance all about? Maybe we can have Special Allowance instead of CCA..
Upto what extent is Meal vouchers or Food Coupons exempted? Is it exempted totally?
Sorry to bother you but as I am new to this compensation part, I am asking you all kind of questions.
Thanks & Regards

From India, Mumbai
Hey Lakshmi,
I guess you would need to sit with your CA or accountant to close on this. It's best adviced to have them in loop, as finally they are who will allow any such rebate.
Please visit the Income Tax website for information.
Attached is a sheet which will be helpful in your study for desigining your compensation and benefit Planning.
Do send my charges for consulating by posting more information and sharing your knoweldge at Citehr
All the best.

From Saudi Arabia, Riyadh

Attached Files (Download Requires Membership)
File Type: doc Income Exempt Under Section 10.doc (123.5 KB, 445 views)

Dear Lakshmi

What is CCA? Is it City Compensatory Allowance- Yes it is

Allowance all about? - City Compensatory Allowance is paid to compensate cost of living in the city. The amount of CCA to be paid depends on company's policy and there is no legislative ruling in this regard except the taxability.

Maybe we can have Special Allowance instead of CCA.. - While recruiting a person for a particular position (Executive) the annual CTC agreed upon is 1 lacs. Now, giving all allowances, perquisites along with the Salary for Executive in your Company comes to 90000 Thousand Now this extra 10000 Thousand can be given by way of Special Allowance.

Upto what extent is Meal vouchers or Food Coupons exempted? Is it exempted totally? - You have to justify the level eg. Executive - Rs.100/- per day , Manager - 150/ - per day, VP - 700/- per day. There is no specific ruling available from govt. (But for safer side justify the amount by grade wise)

Sorry to bother you but as I am new to this compensation part, I am asking you all kind of questions. - No need to worry - we all here to seek help on different topic by various peoples.

Vishal Malik

From India, Delhi

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