Dear Senior,
Have a Great Day !!
I m kavitha, i have 3+ yrs of Experience in HR, 2 Yrs in Recruitment and 1+ Yrs in HR Generalist, and currently i have a career break of 3 yrs for my maternity.And I started looking out for a job Change currently, I m not able to get into Generalist Role which i am interested.
I m updating myself currently with current budgeting and laws changed in this financial year,
Can anybody help me out with some interview questions related to "Statutory compliance' and "Payroll", So that i can be well prepared for taking up interviews with confidence.
Need ur humble help to refresh my Skills and Career,
Hoping from ur side,
Thanks,
Regards,
kavitha

From India, Bangalore
Major Salary Components

Money that is received under Employer-Employee relationship is called Salary . If one is freelancer or are hired by an organization on contract basis, their income would not be treated as salary income.( In such case your income would be treated as income from business and profession)

The salary consists of following parts

Basic Salary: As the name suggests, this forms the very basis of salary. This is the core of salary, and many other components may be calculated based on this amount. It usually depends on one’s grade within the company’s salary structure. It is a fixed part of one’s compensation structure. And the complete amount becomes a part of your in-hand salary.

Allowances: Apart from basic salary, there are some allowances your CTC will contain. Examples include HRA, conveyance allowance, leave travel allowance. Some of these allowances are tax free up to a certain limit and some of them are dependant on your actual spending. It is the amount received by an individual paid by his/her employer in addition to basic salary to meet some service requirements such as Dearness Allowance(DA), House Rent Allowance (HRA), Leave Travel Assistance(LTA) , Lunch Allowance, Conveyance Allowance , Children’s Education Allowance, City compensatory Allowance etc. Allowance can be fully taxable, partly or non taxable.

Dearness Allowance (DA)

The Dearness Allowance is paid out to compensate for increase in the general cost of living due to inflation.

DA is paid out every month. It is a taxable component of your salary.

Conveyance Allowance:

Conveyance allowance is paid out to meet your expenses on commute related transportation.

Conveyance allowance is paid out every month.

Conveyance allowance upto Rs. 800 per month (Rs. 9,600 per year) is tax-free. Any amount over it is taxable.

House Rent Allowance (HRA)

House Rent Allowance (HRA) is paid out to meet full or part of your expenditure on renting a house.

HRA may be expressed as a percentage of your basic.

House Rent Allowance is paid out every month.

HRA can be tax-free, subject to certain conditions. For more on taxation of HRA, please read “Income Tax (IT) treatment of House Rent Allowance (HRA)”

.

Medical Allowance (Reimbursements)

Medical allowance is paid out to help you with the amount that you spend on medical treatment and medicines.

Medical allowance can be paid out monthly or yearly.

Medical allowance is a fully taxable component of your salary.

However, if you receive reimbursement of your medical expenses against submission of bills, such medical reimbursement is tax-free upto Rs. 15,000 per year.

Leave Travel Allowance / Concession (LTA / LTC)

LTA is paid to encourage you to take periodic vacations and travel with your family.

Leave Travel Allowance is usually paid out once a year.

LTA / LTC can be tax-free, provided certain conditions are met. For more on taxation of LTA / LTC, please read “LTA | hrmexpress

Telephone / Mobile Allowance

This is an allowance given to you so that you can maintain a telephone (landline or a cell phone).

It is usually paid out monthly, and is taxable.

Special Allowance

Special Allowance can be given out to pay money that doesn’t fit into any other head!

Such allowances are paid out monthly, and are taxable.

Incentive / Bonus

Incentives or bonuses are paid out depending on your performance (and, at times, depending on the company’s / division’s performance as well). This is to reward employees for their better performance.

Incentive is usually paid out monthly. A bonus can be paid out monthly or can be paid out once a year.

Incentive and bonus are fully taxable.

Refer to the Bonus Payment post for the detailed info

Claims or Perquisite: A part of your salary may also be made up of your billed claims. These include components like mobile allowance, medical allowance etc. There is a maximum limit set to these components and are paid when you submit your bills. These are usually tax free. It is any benefit or amenity granted or provided free of cost or at concessional rate such as Rent free unfurnished house, Rent free furnished house, Motor car facility, Reimbursement of Gas, Electricity & Water, Club facility, Domestic Servant Facility, Interest Subsidy on Loan , Reimbursement of medical bills, Reimbursement of Hospital bills, Reimbursement of telephone bills, Benefits derived by employee stock option, and so on.

How are perquisites taxed? Since these are non-cash components, they cannot be taxed directly. So the income tax laws attach a certain value to each of these components and charges a tax on them. The calculation of this value varies from category to category. Nevertheless, the thumb rule across all categories is that only those benefits that you use for personal purpose will be considered as perquisites.

Deductions: A major part of your CTC comprises compulsory deductibles. These include deductions for provident fund, medical insurance etc. They form a part of your compensation structure but you do not get them as part of your in-hand salary. As such, although it increases your CTC, it does not increment your net salary. Compulsory deduction such as Provident Fund, Income tax,Professional Tax (where applicable) . Optional deduction such as recovery for advance or loan if taken, voluntary contribution to P.F etc

Provident Fund Contribution: Provident fund contribution has two sides – the employer’s contribution and employee’s contribution. This is usually 12 per cent of the basic salary. However, this contribution is not paid out . It is directly deposited in Provident Fund(PF) account and paid to employee when he retires or resigns.There is also employee’s contribution to PF. This amount is deducted from his monthly salary and deposited in his PF account. For details on provident fund you can read Provident Fund (PF) and Voluntary Provident Fund (VPF)

Performance linked pay: Linking a part of the salary to productivity and performance has become a trend today. You get the complete amount only on 100% achievement of target, but it forms a part of your CTC, fattening it up.

Different types of salary:

Gross Salary: is the amount of salary paid after adding all benefits and allowances and before deducting any tax.

Net Salary: is what is left of your salary after deductions have been made.

Take Home Salary: Is usually the Net Salary unless there are some personal deductions like loan or bond re-payments.

Cost to Company: Companies use the term “Cost to Company” to calculate the total cost to to employ . i.e. all the costs associated with an employment contract. Major part of CTC comprises of compulsory deductibles. These include deductions for provident fund, medical insurance etc. They form a part of your compensation structure but you not get them as a part of in-hand salary. As such, although it increases your CTC, it does not increment your net salary.

Taxes: Taxes are an unavoidable evil and they eat up a large chunk of your salary. Taxes are obviously never mentioned in your offer letter. So, ensure that you calculate your tax liabilities with the new income in accordance with tax policies to figure out the amount you will receive in your pay cheque.

The Salary structure varies company to company based on their policies. Some of the common Pay heads used are

1) Basic – 35% – 50% of Gross

2) HRA – 40% of Basic for Non metro & 50% of basic for Metro(Delhi, Mumbai, Chennai or Kolkata)

3) Con – Max Rs. 800/ P M which is Max of Rs. 9600 P A

4) Medical Reim – Max Rs. 1250 / PM which can be max of Rs 15000 PA

5) Spl Allow – Balance of Gross will be provided as Spl Allow

Statutory

1) PF

Emp Contribution - 12% on Basic (can be subjective to 780, which is 12% of the min basic salary i.e. 6500)

Emp’r Contribution - ( EPS – 8.33% (subject to a ceiling of Rs. 541)

PF – Rest of the amount out of 12% (can be subjective to 780, which is 12% of the min basic salary i.e. 6500)

PF administration charges – 1.1%

EDLI – 0.5% (subject to a ceiling salary of Rs. 6500)

EDLI administration charges 0.01% “

2) ESI - Applicable to employees whose Gross Salary is less than or equal to Rs.15000

Emp Contribution - 1.75% on Grorss

Emp’r Contribution - 4.75% on Gross

PT - It Varies State to state

Profession Tax in Maharashtra

In Maharashtra (Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975), Profession Tax is applicable both on Individuals & Organizations (Company, Firm, Proprietary Concern, Hindu Undivided Family (HUF), Society, Club, Association Of Persons, Corporation or any other corporate body in Maharashtra per the provisions of the Maharashtra Professional Tax Act of 1975.

Profession Tax For Individuals in Maharashtra

Every person residing in Maharashtra engaged in any profession, trade, calling or employment is liable and has to obtain a Certificate of Enrolment from the Profession Tax Authority.

Once this certificate is obtained, the person can discharge their individual tax liability for five years by paying lumpsum amount equal to the amount of Profession Tax for four years in advance, getting relief for one year’s payment.

Exempted Individuals in Maharashtra

The following persons are exempted from the provisions of the Profession Tax Act in Maharashtra :

Senior Citizen above 65 years age.

Handicapped Person with more than 40 % disability or parent of a physically disabled or mentally retarded child.

Profession Tax For Organizations:-

An employer organization is required to get registered under the Profession Tax Act and obtain a Registration Certificateunder which the payment in respect of taxes deducted from employees salaries can be made.

Also as a firm, the organization is required to obtain Enrolment Certificate and pay Profession tax on it’s behalf.

Periodicity of Returns

For employers holding Registration Certificate, the period of returns to be filed on basis of annual tax liability amounts are as follows :

Annual Profession Tax Liability < Rs. 5000 - Annual Return.

Annual Profession Tax Liability >= Rs. 5000 but < Rs. 20000 - Quarterly Returns.

Annual Profession Tax Liability >= Rs. 20000 - Monthly Returns.

Returns are required to be filed on or before the last date of the month to which the return relates.

It should contain details of salaries paid and the amount of tax deducted in respect of the month immediately preceding the month to which the return relates.

Due dates for payment of Profession Tax and for filing the returns in Maharashtra:-

For the persons holding Enrolment Certificate - 30th June.

For any delay in the same, interest @ 1.25% per month will be charged.

Bank payment challans to be received by all Enrolment Certificate holders by mid June.

Profession Tax Penalties

Delays in obtaining Enrolment or Registration Certificate – Penalty of Rs. 2/= (Rupees Two) per Day.

Providing false information regarding enrolment – Penalty of 3 times tax amount.

Non-payment of profession tax – Penalty equal to 10% of the amount of tax can be imposed.

Schedule of rates of tax on professions, trades, callings and employments after Budget:

Although new rates been passed in budget but they shall come into force on such date as the state Government may, by notification in the Official Gazette, appoint. ((Government of Maharashtra appointed the 1st July 2009 to be the date from which new profession rates will come into force)

Sr.

Class of Persons

Sr.

Class of Persons

Rate of Tax

No.

1

2

3

1 Salary and wage earners. Such persons whose monthly salaries or wages,

(a) exceed rupees 5,000 but do not exceed rupees 10,000 175 per month

(b) exceed rupees 10,000 2500 per annum, to be paid in the following manner: -

a) rupees two hundred per month except for the month of February;

b) rupees three hundred for the month of

February

Note: 1.

Notwithstanding anything contained in this Schedule, where a person is covered by more than one entry of this Schedule, the highest rate of tax specified under any of those entries shall be applicable in his case. This provision shall not be applicable to entry 16(iv) of the schedule.

Note: 2.

For the purposes of Entry 8 of the Schedule, the Profession Tax shall be calculated on the basis of the “turnover of sales or purchases” of the previous year. If there is no previous year for such dealer, the rate of Profession Tax shall be Rs. 2000. The expressions “turnover of sales” or “turnover of purchases” shall have the same meaning as assigned to them, respectively, under the Maharashtra Value Added Tax Act, 2002. ”

Net Salary = Gross – PF (Emp Cont) – ESI (Emp Cont) – PT

CTC = Gross + PF (Emp’r Cont) – ESI (Emp’r Cont)

Gratuity = (Last Drawn Basic+ DA)/26*15*(no. of years- It is payable to the employee who completes 5yrs of service in the organisation. It can be showed as a part of CTC.)

OT Calculation = (basic+da)/26/8*no.of hrs * 2

If Employees coming under high Salary Then you can again split up the amount in Spl Allow As

1) Food coupons

2) Car Hire

3) Petrol and Maint for Car

4) LTA

FBT is applicable Apart from LTA.

The Variable Pay % also differs company to company based on the Policy. In my previous organization it is 12.5% of the CTC for all the Dept except Sales. For sales it will be 15%.

PaySlip

A paycheck is a document/record issued by an employer to an employee which shows how much money an employee have earned and how much tax or insurance etc. has been deducted. .It will typically detail the gross income and all taxes and any other deductions such as retirement plan or pension contributions, insurances, garnishments, or charitable contributions taken out of the gross amount to arrive at the final net amount of the pay.

Form 16

If you are salaried employee in an organization, then you get the salary after deducting tax by the employer. This process is called as Tax Deduction at Source (TDS). Company must issue a Form 16 which contains the details about the salary earned by that employee and how much tax deducted. The Tax deducted is paid to government by the company. Form 16 is the proof of employee’s income and tax paid to the govt. It is issued under section 203 of Income Tax Act for Tax. Tax payer has to use the Form 16 to file the Income Tax return every financial year.

Thanks and regards,

Bhakti Narang

hrmexpress.wordpress.com

From India, Mumbai
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