Dear All,
Good Morning , I have been seeing many employees payslips, who are getting more than INR 40,000/- per month ? In those payslips have basic component is very low and other allowances are high.
what are the reasons to pay low basic and high other allowances ?
why should we divide salary into different components ?
shall we pay salary without components ,i.e Basic, HRA and Conveyance ?

From India, Gurgaon
Hi Prasadu,
Salary is divided in to different components so that employees can avail tax benefits.
For example a person living in rented flat can have tax benefit on HRA, a person who has medical bills can avail tax benefit on medical allowance and like wise.
Why Basic is low compared to other components.
If Basic is low, liability of employee as well as of employer is reduced.
Statutory pay such as PF, ESIC, HRA, is paid on basic salary.
Higher the basic, higher the contribution.
Please refer to foll for further details -

From India, Mumbai
Dear Prasadu ji,
While endorsing Ankita ji,
1. wish to correct her ( very small corrections) as under:
liability of employer is reduced. ( and not of employee, to my view)
Also gratuity, leave encashment, bonus etc. paid on basic salary.
2. wish to add as under:
(a) no law says or there is no law by which you need to split the salary in various components, except in some states you need to pay minimum HRA.
(b) you need to pay basic ( or basic plus DA component) atleast as per minimum wage rates as applicable.

From India, Mumbai
Dear Seniors
Please tell one thing i am getting basic Rs.10000/- and pf is being deducted Rs.780/- on Basic Rs.6500/- any month i would get basic salary Rs.8000/- then my pf would be deducted either Rs.780/- or less whichever will be according to days.
Please clarify this confusion.

From India, Delhi
Dear Kashyap ji,
Para 29(3) of the Act says that the contributions shall be calculated on salary actually drawn during the whole month whether paid on daily, weekly, fortnightly or monthly basis.
Your salary drawn is Rs. 8000 which is above the ceiling. Therefore your contribution will be on ceiling i.e. 6500. The deduction will be Rs. 780.

From India, Mumbai
Dear Keshav Korgaonkar Thank’s a lot for giving valuable information. could you tell esi applicable at advertising company if applicable in which condition and from since. Regards Kashyap
From India, Delhi
Dear Kashyap ji,
Greetings of the day to you as well to all the viewers.
Advertising agency sells its expert services to client or clients to launch an effective campaign of its products / services. Therefore, an advertisement agency is a 'shop'. Supreme Court decision in ESIC v. RK Swami - 1993- CLR.1068(SC); 1994(84)FJR 67.

From India, Mumbai
Dear Keshav Korgaonkar Ji
i had applied esi registration online after two months ESI Enforcement officer had visited in our office he says to produce record last five years to comply back afterthat we have appointed consultant afterthat i don't what did he do enforcement officer does not come again even a call.
i am confuse about enforcement officer have power to make anything wrong or write report if he would make coverage date change five year back or if he would the same. consultant never disclose fact.
Thank's & Regards

From India, Delhi
Dear all,
I have confusion on gratuity, who are works for 5 years in one organization? they'l get gratuity amount on his/her current basic .
what am i asking is , this amount will pay by employer voluntary or are they deduct amount from his/her salary ?

From India, Gurgaon
Gratuity is not paid from the salary....

See... it is like this...

Gross salary includes -


Dearness Allowance

House Rent Allowance

Medical Allowance

Food Allowance

Special Allowance

Mobile reimbusement (if any)

All types of allowances

This is your monthly gross

(You monthly net will have Gross - Employee PF contribution - Employee ESIC Contribution - Professional Tax - TDS)

When you multiply monthly gross with 12, it becomes your annual gross

when you add

Employer PF contribution

Employer ESIC Contribution

Bonus / Ex-gratia / Super Annuation


It becomes your CTC.

So though Gratuity is a part of your CTC, it is not a part of your Gross.

Gratuity is 100% contributed by the company.

Gratuity is a compensation provided by the company to an employee who serves for long tenure.

Any person who serves for 5 or more years is given this Gratuity on resignation / termination / retirement.

However company contributes the gratuity for the person annually and keeps it safe with say LIC.

Gratuity cannot be withheld unless the person is terminated and has resulted in financial loss to the company.

Also note that if a person is ending the employment because of Death or Partial/Full Disability, Gratuity is paid to him/her for the tenure served irrespective of qualifying the minimum of 5 years of clause.

I hope it cleared your doubts...

From India, Mumbai

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