Hello, Please let me know what can be the salary structure after new pf rule. What is the rebeat for HRA? Do we have to put HRA as a 40% of the basic and then subtract from the gross salary for the PF calculation.
Thank you
4th June 2019 From India, Udaipur
Dear Anamika,
Keep HRA 40% of basic, rented employees may avail the tax benefit and you can exclude HRA from PF calculation.
4th June 2019 From India, Mumbai
That means your employees work only to pay rent. it is true that under the definition of wages HRA is excluded. But it does not mean that you can pay 40% or 50% as HRA. It is okay if the HRA is not part of salary as in the case of government servants and the employees of public sector banks and other undertakings. It is not the case of private companies where a total salary or total cost to company is initially fixed and this amount is bifurcated into small components like Basic salary, HRA, Conveyance etc etc for no reason. If you take a leave you are paid according to your total salary or gross salary. If you take leave without pay, it is the Gross salary and not the basic salary which is subjected to deduction. That means it is the gross salary which is agreed to be paid to an employee and that is the PF qualifying salary.
In the case of PF, there is a ceiling of Rs 15000 on wages and the employers who do such bifurcation should understand that it is a matter of only Rs 1800 and by contributing on the entire salary subject to Rs 15000, they will be incurring a very small addition to their cost. Also remember that there are a number of employers who contribute their PF on amounts more than the ceiling of Rs 15000.
4th June 2019 From India, Kannur
Dear Madhu Sir,
You said, there is no reason of bifurcating the salary components then could you please explain the below subject for my further knowledge.
1. Why income tax allows exemptions on different allowances like (conveyance,HRA,LTA) ?
2. Without bifurcating allowances how could we calculate tax ?
4th June 2019 From India, Mumbai
Dear All,
Greetings!!
There are certain changes which are proposed.
Further, for PF calculation Basic+DA+Special allowance will be considered. (As per Supreme court recent guideline).
As far as concern to HRA, it'll be accounting as metro and non metro.
Rgds
4th June 2019 From India, Delhi
Dear Ravi, under Income Tax act also the same theory should be applied. Whatever we get as remuneration is the salary and what all are paid additionally are allowances. If a scrutiny comes, I am sure the IT will also insist that you should include everything paid as part of contract of employment as salary.
Let me take you to one leading case, Wockhardt Hospital, Hyderabad Vs Dep of Income Tax. The hospital had employed doctors as Consultants.They were subjected income tax deduction as if they are consultants. But the Income Tax department observed that these doctors are following the general rules of the hospital with regard to timing, leave rules, reporting and other hospital protocols and there were prohibitions with regard to private practicing. The DOT said that there existed employee employer relationship and the amount paid which has no connection with the amount of charges collected from the patients should only be regarded as Salaries and tax deducted accordingly. In this case we can find that whatever is paid as remuneration as per contract of service is the salary.
I repeat, the next battle will definitely be for a clarification on HRA part of salary. In my opinion HRA as part of salary should be included in salary for qualifying PF and Gratuity whereas HRA paid separately considering its need should be omitted.
I have explained the term in another thread. Please read that one along with this thread so that I don't waste my time and energy.
https://www.citehr.com/611309-epf-de...ml#post2425693
4th June 2019 From India, Kannur
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