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Thread Started by #anuradha_kb

what is the percentage of basic of the total CTC. Is there any rule to restrict basic to 50% of CTC. can it be more or less than 50 %.
18th September 2007 From Germany, Leonberg
Hi , Basic salary is veriable in between 35 % to 40% and also its depend upon the comapny policies. Regards, Maniksing
18th September 2007 From India, Bangalore
Hi Anuradha,
All are very true..
It depends on company salary structure, it vary from company to company.
Generally it varies from 35 to 50%... even it might be higher or lower also..
Amit Seth.
18th September 2007 From India, Ahmadabad
19th September 2007 From India, Mumbai
Dear Anuradha,
This depend on the company policy but in the 7A ( PF ) enquiry this issue is arries and after facing this enquiry i have got an idea that the basic salary have to be vary between 35% And 65%
with regards,
19th September 2007 From India
It is right that it varies from company to company, but std as per govt. rules is that of 60% and 50% is quite fair. But less than 50% could be questionable, specially for small companies who do not provide too many benefits to the employees.
Then it also varies on what kind of organization is it? whether a firm or a trust or a ltd company etc...?
20th September 2007 From India, New Delhi
Hi Rajdeeb,
The contents of the salary break up is as below, you can prepare it at the suitability of your own. HRA would be 50 or 60% of basic.
CCA - 825/- is exempted from tax
Other Allowance
Mobile Reimbursement
Medical Reimbursement of 1250/month is exempted from tax
Gross Per Month = Sum of all the above.
Gross Per Annum= 12*Gross/Month
PF Contribution= 12% of Basic/Annum
ESI Contribution = 4.75% of Gross/Annum
Medical = The mediclaim facility provided to an employee who are not covered under ESI as the maximum ceiling for ESI is 10000/Month.
Getting more than this will be covered under Mediclaim or it depends on company policy
EX-Gratia/Bonus = A fixed amount as Bonus
Annual Fixed Gross Cost= Gross/Annum+ Ex-gratia
Annual Total Cost = AFGC + PF+ESIC
Annual total cost is also called as CTC.
Hope it must have helped you to clear your queries up to some extent.
Amit Seth.
20th September 2007 From India, Ahmadabad
Basic salary can vary according to the company rule it is divided into different components that when added should give result 100%
20th September 2007
There is no hard and fast rule in fixing the Basic. But it should be reasonable. If the Basic+DA part is around 60% and Allowance part as 40% is normally treated as reasonable by Authorities
21st September 2007
I have an exciting idea for all of us, what we can do is........... lets share everyones' companies salary structure and let us also find a solution on how different co. is using salary structure to save emps' taxes.

I am starting from my input first............

First we decide the CTC of the person would be??

Break up of CTC.

Basic - 40% of ctc

HRA - 50% of basic

Tpt All - (800 if CTC less than 9000, 1000 if ctc less than 15000, 2000 if ctc above 15000)

Medical All - (optional if ESI is paid, else 10% on basic)

Special All - (ctc - pf-esi- bonus - Basic - hra - tpt all - medical all)


Gross Salary

PF - 12% on basic

ESI - 4.75% on basic (optional, if medical all paid )

Bonus - 10% on basic and limit is upto 500



Net Salary (in hand ) = Gross Sal - PF - ESI (1.75% on basic)

This is the structure used by y co. but we are not giving any think in which emp. can save taxes.

I need suggestion from experts on how to design the salary structure so that emp. can save income tax.

Others, please contribute......./ Share yours co. salary structure, this would be good learning on compensation/ Salary issues.

- Sanjukta
22nd September 2007 From India, Mumbai
As per the PF act, the contribution is payable only on basic wages.What consitutes basic wage is million dollar question.Various courts have given different interpretation like what are the earned componets while on duty or on leave is basic.Hence other than HRA is basic.Such basic wage accotrding to the act is restricted to Rs.6500. Another view is that, when their is contract of employment is prevail, what the employer and employee agrees as wages by bifrcution is basic. This is the well settled position by supreme court.However department is taking the corporates for ride by the Gujart High court decision and the industries should address the issue in the proper forum by litiation or representation.
The main affecting industries are shop act and contract workers.
22nd September 2007 From India, Madras
Its so nice that Sanjukta has taken the initiative. However, I feel in companies the basis - allowance ratio is about 50 - 50 of CTC.
AS far as saving tax is concerned, there have been more and more precise guidelines from IT Department. You can avail 15000 PA as Medical allowance. This is exempted subject to producing bills. You can benefit from Conv. Allowance - 9600 PA.
HRA if calculated @ 40 % of basis serves the purpose.
As such the investment and limits are set 100000 PA. So we cant do much with salary structure.
Many companies indulge into voucher payment which is not a professional way to save tax. Some time back the practice of food coupens were very famous but their limit is upto 15000 PA. This can be tried.
LTA Reimbursement is exempted for twice in a slab of 4 years. This is a good option. We pay LTA Reimb. of Rs. 20000 PA to managers. This helps.
Veiws from others invited please.
- HIten

22nd September 2007 From India, New Delhi
Hi hiten,
Department means: Provident fund department
Industries means : all industries to whom 7A proceeding is intiatied on the above subject.
22nd September 2007 From India, Madras
Yes you are right for Basic - 50% on CTC. But I would like to know more details on how to save tax... so that we can show benefit to employees. - sanjukta
22nd September 2007 From India, Mumbai
Hi All,
I agree with you all that it depends on company's policy.
However, one should also take into consideration of local law to plan their tax payouts and statutory compliances.
For example in fixing 50% of salary for Metro cities and 40% for other cities are worked on the logic to avail House Rent Allowance exemptions to employees as per Income Tax Act in India.
Further, there are some labuor laws that are prevailing in India which needs consideration. Since past 18 months EPF department in Karnataka has taken a view that employers are reducing the basic salary to avoid PF contribution. They felt it as anti labour welfare practice and asking the employer who is paying less than 50% Gross Salary as basic salary to pay CPF contribution on Gross salary which includes allowances. Appeal by employers to Honorable high court has be set aside. It went in favour of department.
HR community should take note of these aspects while working out components of salary.
22nd September 2007 From India, Bangalore
HI cud u pls tell me shd the sal structure be 100% including PF & ESI or all the components except PF & ESI to be 100% of the ctc Regards Yash
24th September 2007 From India
Dear Friends
According to Govt rules the Basic should be 60% of the CTC or 6500. If the basic is 6500 with a lesser % then there will not be any problem. But when the basic is less the 6500 then we should make sure that the basic is not less that 60%.
Kavitha S
25th September 2007 From India, Coimbatore
Hi Kavita, Is that the rule? because we are maintaining standard structure for all employees means Basic - 50%. - sanjukta
25th September 2007 From India, Mumbai
Dear Kavitha,
Can you provide the Government rule to state that the basic should be 60%. In my 35 of compliance service I never heard such rule.It will really help me and persons like me. In my view if their is a contract of employment and the employee and employer agrees for some percentage of CTC as basic, may be it can be 60% or so.
Pl. highlight the rule
25th September 2007 From India, Madras
But generally Basic not exceeds to 50% but if basic is greater than 50 % than percentage of HRA etc have to less so that whole amount fits into the CTC Abhishek Saini CITE HR , Member
25th September 2007 From India, Jamnagar
There is no restriction in calculating the Basic and dont have a specific % for calculation, like HRA. It is left to the management discretion. HR Professional should be a benefit to the employee n employer for the growth of the organisation. And thus the basic are calculated.
26th September 2007 From India, Bangalore
Hi, Any of the percent we can set but should be checked that it should cover the minimum wages Rate Fixed by any goverment. Suraj Biswal
3rd October 2007 From India, Bhubaneswar
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