Hello all,
Is there any provision that the basic/basic+da should be 50% of the gross salary? What should be the percentage of basic in a gross salary and in which act is it mentioned? Kindly clarify.
Parag
From India, Nasik
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3Is there any provision that the basic/basic+da should be 50% of the gross salary? What should be the percentage of basic in a gross salary and in which act is it mentioned? Kindly clarify.
Parag
From India, Nasik
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hello prag, basic percentage is 40 to 60% of the ctc or gross salary. BASIC- 60% HRA- 30% CONV- 10% GROSS SALARY - 100% IT’S ENOUGH FOR YOUR QUERY.
From India, Delhi
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From India, Delhi
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Dear Mukesh,
Thank you for your reply. Do you have any circular from the government or something similar? I mean, is what you stated being followed by you/your company mentioned in any statute?
I wanted to know where it is referenced in the statute.
Parag
From India, Nasik
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Thank you for your reply. Do you have any circular from the government or something similar? I mean, is what you stated being followed by you/your company mentioned in any statute?
I wanted to know where it is referenced in the statute.
Parag
From India, Nasik
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There is no rule or clause in any Act that the basic must be 50% or 60% of the gross salary. This demand has recently been made by PF authorities, and there is also a circular issued by PF authorities to their officers, which is being circulated to various companies as well.
I happened to attend a workshop convened by EFSI where one of the speakers was the PF commissioner himself. When one of the participants raised the same question, he clearly stated that THERE IS NO SUCH RULE.
It is simply because if the basic component in the salary breakdown is higher, the employee would receive more benefits in terms of pension, PF contribution (by the employer), etc. After all, at the time of retirement, the employee needs money to support his family, isn't it? Without this rationale, there is no rule written anywhere in the Act, and that is the message the PF commissioner conveyed during the workshop.
Now, many organizations are under pressure from PF authorities (via the internal circular they have issued) that the Basic (and DA) should not be less than the minimum wages prescribed by the government. This is a matter that needs further discussion.
Balaji
From India, Madras
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I happened to attend a workshop convened by EFSI where one of the speakers was the PF commissioner himself. When one of the participants raised the same question, he clearly stated that THERE IS NO SUCH RULE.
It is simply because if the basic component in the salary breakdown is higher, the employee would receive more benefits in terms of pension, PF contribution (by the employer), etc. After all, at the time of retirement, the employee needs money to support his family, isn't it? Without this rationale, there is no rule written anywhere in the Act, and that is the message the PF commissioner conveyed during the workshop.
Now, many organizations are under pressure from PF authorities (via the internal circular they have issued) that the Basic (and DA) should not be less than the minimum wages prescribed by the government. This is a matter that needs further discussion.
Balaji
From India, Madras
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Dear Parag,
It will help you:
(1) Basic: 35-40% of gross salary
HRA - 40% of Basic
Transport Allowance: Rs. 800 (Fixed) - tax limits
Medical: Rs. 1250 (Fixed) - tax limits - (yearly 15000/-)
Adhoc allowance - Balancing amount
Total of (1) constitutes - Gross Fixed
(2) Gross benefits like - PF - 12% of Basic & DA
Gratuity: 4.83% of basic & DA
ESIC - 4.75% of GPA - (Less than 15000/- GPM)
Food Coupon
Mediclaim Insurance/Life
LTA
Bonus
Total of (2) constitutes - Gross Benefits
Sum total of (1) & (2) constitutes CTC.
Regards,
Sanjeev Patil
From India, Mumbai
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It will help you:
(1) Basic: 35-40% of gross salary
HRA - 40% of Basic
Transport Allowance: Rs. 800 (Fixed) - tax limits
Medical: Rs. 1250 (Fixed) - tax limits - (yearly 15000/-)
Adhoc allowance - Balancing amount
Total of (1) constitutes - Gross Fixed
(2) Gross benefits like - PF - 12% of Basic & DA
Gratuity: 4.83% of basic & DA
ESIC - 4.75% of GPA - (Less than 15000/- GPM)
Food Coupon
Mediclaim Insurance/Life
LTA
Bonus
Total of (2) constitutes - Gross Benefits
Sum total of (1) & (2) constitutes CTC.
Regards,
Sanjeev Patil
From India, Mumbai
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Dear Prag,
The Income Tax Act contains provisions regarding HRA. Please consult a Chartered Accountant for more information. In metropolitan cities, it is typically 50% of the Basic salary, while in non-metropolitan cities, it is usually 40% of the Basic salary.
RL Dhingra
Advocate & Labour Law Consultant
Email: rld_498@rediffmail.com
09818309937
From India, Delhi
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The Income Tax Act contains provisions regarding HRA. Please consult a Chartered Accountant for more information. In metropolitan cities, it is typically 50% of the Basic salary, while in non-metropolitan cities, it is usually 40% of the Basic salary.
RL Dhingra
Advocate & Labour Law Consultant
Email: rld_498@rediffmail.com
09818309937
From India, Delhi
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Before fixing the basics, just find the minimum salary for that post as per the labor office government notification. As per government rules, for each work, there is a minimum basic salary. We have to keep that basic and with that basic, calculate the HRA and other allowances. It will be good if we keep 60% as the basic.
Regards,
Ajesh B.
HR Admin Executive in an MNC
From India, Kochi
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Regards,
Ajesh B.
HR Admin Executive in an MNC
From India, Kochi
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According to the Minimum Wages Act, the Basic should be 35 to 50% of the Gross salary. The range depends on the C&B policies of the companies. Some companies believe in variable components, while others believe in providing a good basic within the aforementioned range. This not only ensures good post-retirement benefits but also represents a fixed liability of the company.
Shneha D Thakur
From India, Delhi
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Shneha D Thakur
From India, Delhi
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Hi there,
Recently, the Karnataka High Court issued a judgment regarding the splitting of minimum wages for the purpose of PF contribution. The Honorable Court held that splitting of minimum wages cannot be done, and PF contribution should be paid for the entire amount, i.e., for the total wage.
I don't think there is any hard and fast rule followed to fix the basic wages. It all depends on management.
From India, Madras
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Recently, the Karnataka High Court issued a judgment regarding the splitting of minimum wages for the purpose of PF contribution. The Honorable Court held that splitting of minimum wages cannot be done, and PF contribution should be paid for the entire amount, i.e., for the total wage.
I don't think there is any hard and fast rule followed to fix the basic wages. It all depends on management.
From India, Madras
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Basic Pay is the fixed monthly salary component received by employees. It can be a fixed percentage of CTC based on employee grades like:
Grade 1: 15-25% of Fixed Pay
Grade 2: 20-30% of Fixed Pay
Grade 3: 25-35% of Fixed Pay
Grade 4: 30-40% of Fixed Pay, etc.
However, there is no hard and fast rule for it. It depends on the company to company and their salary structure.
PayrollSolutions
Software & IT Solutions Company
From India, Delhi
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Grade 1: 15-25% of Fixed Pay
Grade 2: 20-30% of Fixed Pay
Grade 3: 25-35% of Fixed Pay
Grade 4: 30-40% of Fixed Pay, etc.
However, there is no hard and fast rule for it. It depends on the company to company and their salary structure.
PayrollSolutions
Software & IT Solutions Company
From India, Delhi
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Hi all,
I think minimum wages refer to gross payment because the term "wage" refers to basic + DA. It never mentions allowances. I am not sure, but there should be a provision for a minimum PF contribution. If you refer to the amount of contribution, we can easily figure out what the minimum percentage of basic would be.
Vishwanath
From India, Hyderabad
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I think minimum wages refer to gross payment because the term "wage" refers to basic + DA. It never mentions allowances. I am not sure, but there should be a provision for a minimum PF contribution. If you refer to the amount of contribution, we can easily figure out what the minimum percentage of basic would be.
Vishwanath
From India, Hyderabad
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Dear Mr. Parag,
First of all, thanks for Balaji. I agree with their comments. You can say salary bifurcation depends on the area where you are situated, like a metro or an A-class city, wherever... Simply put, the minimum basic should be the minimum wage, and after that, 35% to 100% plus nothing or plus benefits; it depends on your company.
For further clarification, feel free to contact me at tanwarb.nv@gmail.com or 9982814048.
Thanks,
Balram Tanwar
From India, Ambala
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First of all, thanks for Balaji. I agree with their comments. You can say salary bifurcation depends on the area where you are situated, like a metro or an A-class city, wherever... Simply put, the minimum basic should be the minimum wage, and after that, 35% to 100% plus nothing or plus benefits; it depends on your company.
For further clarification, feel free to contact me at tanwarb.nv@gmail.com or 9982814048.
Thanks,
Balram Tanwar
From India, Ambala
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Basic salary would be between 40 to 60 % of gross salary, but many company dicide this as per his gross laibility to employee monthly or yearly. Thanks & Regards Satyendra Mishra +91-9891090856
From India, New Delhi
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From India, New Delhi
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Dear Balaji/Dhingra, Thanks for the information regarding salary breakup,If u have that circular copy kindly give us then we will clear about it. With regards, Sameer K Ghosh
From India, Daman
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From India, Daman
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Mr. Sameer, Please see the circular (issued by PFauthorities) and also the judgment issued by the Hon’ble Punjab and Haryana High Court. This is what the confusion all about. Balaji
From India, Madras
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From India, Madras
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Dear Parag,
If you want to create a salary structure, please consult with your senior management and Accounts (regarding Income Tax provisions) as there is no specific direction in any act for a percentage of basic salary.
MILIND HR CONSULTANT
From India, Pune
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If you want to create a salary structure, please consult with your senior management and Accounts (regarding Income Tax provisions) as there is no specific direction in any act for a percentage of basic salary.
MILIND HR CONSULTANT
From India, Pune
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Dear Balaji, Thanks but in circular it is not define % of salary breakup for higher salary package also not clear for component. Kindly give us your valuable experience. With regards, Sameer K Ghosh
From India, Daman
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From India, Daman
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Hi all,
I am accepting V. Balaji's word. In my view, if the basic salary is below 60%, there exists a question of DA, and DA will vary according to the Consumer Price Index (CPI). Every six months, the government will revise this CPI, so the salary would be adjusted accordingly.
To minimize the risk of DA, most companies will decide the basic as 60% or above.
Thank you to all.
From India, Hyderabad
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I am accepting V. Balaji's word. In my view, if the basic salary is below 60%, there exists a question of DA, and DA will vary according to the Consumer Price Index (CPI). Every six months, the government will revise this CPI, so the salary would be adjusted accordingly.
To minimize the risk of DA, most companies will decide the basic as 60% or above.
Thank you to all.
From India, Hyderabad
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Dear All,
I am just entering my office after attending a workshop convened by Employers' Federation of Southern India (EFSI) which concluded an hour back.
There were a lot of deliberations on splitting of wages into different components. Three PF commissioners (Royapettah, Ambattur, and Tambaram jurisdictions) were present, and they UNANIMOUSLY SAID THAT THERE IS NO RULE THAT 60% OF WAGES MUST BE CONSIDERED FOR PF CONTRIBUTION. Therefore, my dear friends, do not have a different opinion on this subject.
However, there was one point that might bother you. Wherever you pay your employees a wage of Rs. 5000/- p.m. (where the minimum wage is Rs. 4000/-) and you follow this assumed wage pattern,
Basic - Rs. 1500
HRA - Rs. 1000
Convey - Rs. 500
Special Allowance - Rs. 1000
Washing Allowance - Rs. 1000
then, excluding the HRA, you must contribute PF for Rs. 4000/-. That is what one of the commissioners of PF said, and they will view the salary structure like that. They also added that this will be followed for the employees who get wages less than their prescribed limit of Rs. 6500/-. Those who get their basic wages more than Rs. 6500/- are not particular about it.
To add fuel to the fire, there is a judgment pronounced by Madhya Pradesh High Court in the case of Surya Roshini Ltd Vs. Employers' Provident Fund and Another (LLR 568 - June 2011 issue), wherein it was held that allowances viz. Transport Allowance, Attendance incentive, Washing allowance, and special allowance paid to employees have to be included in Basic salary and arrive at PF contribution. This will certainly go against the employer.
In the meanwhile, Labour Law Reporter (Mr. H.L. Kumar, Advocate at the Supreme Court) wrote a letter to PF commissioner at New Delhi questioning the Sanctity of the circular issued by PF authorities and insisting them to withdraw the circular. Let's wait and see what their reaction is to this letter.
Hope all these points will give you additional ideas on this.
Balaji
From India, Madras
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I am just entering my office after attending a workshop convened by Employers' Federation of Southern India (EFSI) which concluded an hour back.
There were a lot of deliberations on splitting of wages into different components. Three PF commissioners (Royapettah, Ambattur, and Tambaram jurisdictions) were present, and they UNANIMOUSLY SAID THAT THERE IS NO RULE THAT 60% OF WAGES MUST BE CONSIDERED FOR PF CONTRIBUTION. Therefore, my dear friends, do not have a different opinion on this subject.
However, there was one point that might bother you. Wherever you pay your employees a wage of Rs. 5000/- p.m. (where the minimum wage is Rs. 4000/-) and you follow this assumed wage pattern,
Basic - Rs. 1500
HRA - Rs. 1000
Convey - Rs. 500
Special Allowance - Rs. 1000
Washing Allowance - Rs. 1000
then, excluding the HRA, you must contribute PF for Rs. 4000/-. That is what one of the commissioners of PF said, and they will view the salary structure like that. They also added that this will be followed for the employees who get wages less than their prescribed limit of Rs. 6500/-. Those who get their basic wages more than Rs. 6500/- are not particular about it.
To add fuel to the fire, there is a judgment pronounced by Madhya Pradesh High Court in the case of Surya Roshini Ltd Vs. Employers' Provident Fund and Another (LLR 568 - June 2011 issue), wherein it was held that allowances viz. Transport Allowance, Attendance incentive, Washing allowance, and special allowance paid to employees have to be included in Basic salary and arrive at PF contribution. This will certainly go against the employer.
In the meanwhile, Labour Law Reporter (Mr. H.L. Kumar, Advocate at the Supreme Court) wrote a letter to PF commissioner at New Delhi questioning the Sanctity of the circular issued by PF authorities and insisting them to withdraw the circular. Let's wait and see what their reaction is to this letter.
Hope all these points will give you additional ideas on this.
Balaji
From India, Madras
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Dear All,
Yes, I agree with all the comments on the basics, and it is left to the discretion of the employer to fix it based on the grades and the CTC they set for the position, from which these can be back-calculated. The key question that still concerns me is that the PF officials are insisting that the basic on which PF is deducted at 12% should be 60% of the CTC paid to an employee. Is this true or false? What happens when a company pays PF to its employees on a basic that is less than 60% of the Gross Salary or CTC? I am keen on some views on this, please.
Thanks,
Stephen
From India, Chennai
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Yes, I agree with all the comments on the basics, and it is left to the discretion of the employer to fix it based on the grades and the CTC they set for the position, from which these can be back-calculated. The key question that still concerns me is that the PF officials are insisting that the basic on which PF is deducted at 12% should be 60% of the CTC paid to an employee. Is this true or false? What happens when a company pays PF to its employees on a basic that is less than 60% of the Gross Salary or CTC? I am keen on some views on this, please.
Thanks,
Stephen
From India, Chennai
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If you want any act so you can follow minimum wages act in which you will fixed amount of basic & da and other part of salary you can calculate as per your company rules
From India
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From India
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PF Office and Basic Salary Requirement
Nowadays, the PF office seems to be insisting that the basic salary should be mandatory at 50% of the CTC if the basic amount is ₹15,000 or less. My questions are:
1. Is this a general rule and implemented consistently?
2. This seems to happen only when there is scrutiny.
Last but not least, are there formal notifications from the Labor Ministry? To me, this pressure from the PF office looks like a local and personal push from the local PF commissioner and overenthusiastic officers. Can someone provide an opinion backed by documents from the Labor Ministry?
Regards, Santosh
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Nowadays, the PF office seems to be insisting that the basic salary should be mandatory at 50% of the CTC if the basic amount is ₹15,000 or less. My questions are:
1. Is this a general rule and implemented consistently?
2. This seems to happen only when there is scrutiny.
Last but not least, are there formal notifications from the Labor Ministry? To me, this pressure from the PF office looks like a local and personal push from the local PF commissioner and overenthusiastic officers. Can someone provide an opinion backed by documents from the Labor Ministry?
Regards, Santosh
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i want best salary structure for monthly salary of Rs. 75000/- with low tax
From India, Ahmedabad
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From India, Ahmedabad
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can anybody help me to prepare salary structure for monthly salary of Rs. 75000/- with minimum tax
From India, Ahmedabad
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From India, Ahmedabad
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Dear All, In west bengal, as per the minimum wages notification, mw amount should be maintained in basic & DA column.
From India, Kolkata
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From India, Kolkata
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PF NO Contribution on CTC.pdf
Salary structure CTC 15000.xlsx