It depends on your CTC structure. You cant just like that modify the structure as it needs your management approval. I am sure about your workings, but still you can not reduce the CTC but there is an possibility to increase the take home by reducing the components which are considered for CTC workings. For example, if basic is taken for all CTC workings then reduce the basic and increase the allowance, by doing this, your employee will have more take but benefits like PF, Gratuity etc will be reduced
I am not sure I understand (i) the problem (ii) the need to introduce "Non Taxable" Allowances to increase the take home and (iii) the reason for the difference of Rs 4,000/= plus between CTC and take home.
You mention that the monthly CTC is Rs 13,000. This works out to an Annual CTC of Rs 1,56,000/= which is below the taxable bracket. There would not be any Income Tax deduction taking place for such employees. Since no tax is deductible, introduction of "Tax Exempt" allowances will not make any difference.
An Illustrative Salary Stack could be worked as follows (I am mentioning tax deductible amounts, even though in the case that you have cited, no Tax is payable becuase the annual income is below the Tax threshold.):
Basic Rs 5,200/= per month or Rs 62,400 per annum
HRA Rs 2,080/= per month or Rs 24,960/= per annum (Since Vadodara is a non metro location only 40% of basic is eligible for a Tax deduction, which is computed as the minimum of three computations.)
Transport Allowance Rs 800/= per month or Rs 9,600/= per annum. (This is a tax exempt allowance to the extent of Rs 9,600 per annum)
Special Allowance Rs 3,670/= per month or Rs 44,040 per annum. (This is salary paid which does not count towards PF)
Medical Reimbursement Rs 1,250/= per month or Rs 15,000 per annum. (This is amount is exempt from tax against submission of bills)
Aggregate Rs 13,000/= per month or Rs 1,56,000/= per annum.
Provident Fund deduction (taken at 8.33%) is Rs 433/= per month or Rs 5,196/= per annum.
Since no tax is deductible, the Net Salary Payable to the employee would be Rs 13,000/= less Rs 433/= i.e., Rs 12,567/= per month or Rs 1,50,804/= per annum. This is 96.67% of the CTC.
While this gives an alternative, I still haven't been able to understand the three issues that I mentioned in the beginning of the post.
I hope this response is of help to you.
From India, Bangalore
the pf contribution may be upto 12% is better rather than 8.33%, it is indirect income for employee. The pf accumulation is needed for employees whose continuous contribution for 10 years will be getting pension. It is also non taxable item to some extent.
From India, Visakhapatnam
The amount that you have mentioned is a regular take home salary. There would also be some annual components which would be paid to employees periodically such as LTA, Bonus etc. Count that too in the take home as these amounts may not be paid regularly but are paid on an annual basis. which according to me would bring up the take home to around 11000/-.
To get more insight , it is suggested that you share with the forum a break-up of CTC so that other members can give their opinion on increasing the take home.
From India, Mumbai