Hr Consulting ,trainer -creative Thinking
Talent Acquisition Manager
Executive - Hr
The contents of the salary break up may be 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
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.
Apart from this Food coupons, Holiday package and Furnishing items are included in their CTC.
Hope it must help you to clear your queries up to some extent.
Pl find below the breakup where u can save tax under these components:
HRA : upto 50% tax exempted in Metros. Other Cities 40 % & 30 % ( refere the Tax Rule book). provided he /she can produce the rent receipt
Conveyance Allow : 800 monthly tax exempted
Medical Allow : upto 1250 monthly tax exempted provided he /she can produce the medical bills
LTA : If a person claim ONCE in a 2 years block ( As per income tax TWICE in a 4 yrs block) provided he /she can produce the tickets
Food Allow : Sodexo coupans
Telephone/ Molibe Reimbursement : On bills Tax free
Driver salary : for high salaries people
Vehcle Maintainence : Producing Bills
Petrol : for high salaried people ; producing bills
News papers & Magzine Reimbursements : producing bills
If you break the salary into 2 parts like fixed salary ( from where the employee will get the salary into their account ) and Reimbursements, them they will more get benefits and save the TAX
Hope I have clarified your queries to a certain extent.
Thanx AMatya it was very useful info but i hv a few doubts.
1) What does high salaried ppl mean in case of driver salary, petrol reimbursement? Is there a certain amount and if yes what is that amount?
2)Arnt reimbursement a part of taxable salary?
3)Can a person get conveyance allowance and driver, vehicle maintenance & petrol reimbursement all at the same time? Coz purpose is same.
4)Are telephone bills, petrol, driver and vehicle maintenance bill amounts completely tax free? if not then to wat extent
Iknow too many questions but it wud b really nice if u cud answer.
Good information shared by Amatya..
High salaried people stands for those who is getting a high package and saving taxes are tough for them without these components...
Amount Reimbursement is also a part of taxable salary but they are exempted from taxes up to a certain level..
Telephone bills, petrol, driver and vehicle maintenance bill amounts completely tax free? if not then to what extent...
Telephone bills - 30,000/- per annum
Petrol - 72,000/- per annum
Driver salary - 60,000/- per annum
Vehicle maintenance - 25,000/- per annum..
Hope these are the sufficient information related with same..
For sales team also structure would remain almost same..
only thing conveyance would not be added in their salary structure unless it is fixed for a month.. Mobile reimbursement may be added as a fix amount per month, if it cross the fixed limit then after producing the bills of same with a special approval from his senior that can be reimbursed..
Hope it must have solved your query...
Thanks for your reply and yes it solved my query.. :)
wht if ur conveyance and mobile reimbursements are fixed... do we add the details of the same in their appt letter itself OR do u hav a seperate format in which we give all their reimbursement (includes mobile, conveyance, travel, etc) details..
I was looking for some details on tax frienldy compensation structure and found some very valuable inputs here, given by you. Thanks for sharing them with all of us.
In my organisation, we have a very general compensation structure which does not help the employees in tax saving. From the next financial year, I plan to make some changes to it.
I will be grateful if you can tell me about the salary components which are tax friendly and do not attract FBT as well.
Awaiting your response.
Thanks for the appreciation...
But i think we have detailed the components very broadly, which are sufficient to prepare a Tax friendly salary structure...
Regarding FBT, most of these components attracts a nominal percentage of FBT to the organisation...
Wish you all the Best...
This is an excellent post and valuable inputs shared by Amit & Amatya..
Besides the above components, in some cases company can pay the scholarship allowance to select employee's children at least 1.25 lacs p.a. and the company claims this as an deductible expenditure in their accounts.
This is chanchala, Your session on 'S Curve' during the Citr HR meet was just excellent!!! :) Could not convey u that day since it was getting late and I had to leave....Hope to learn a lot of things from u r sessions in the future......
Thanks and regards,
I have gone through all the posts in the thread. I would like to draw attention to some things-
1. If an employee claims for Vehicle maintainance allowance (Rs. 1200 pm generally), he cannot claim Conveyance allowance for tax exemption.
2. You can also include Children education allowance in your structure. Rs. 100 per child per month is tax exempt. If child is staying in hostel, Rs. 100+300 is tax exempt for every child.
3. Apart from this, Expenses borne by employees as tuition fee of their children is included under 80 (c) in financial year 2007-2008. So, at the time of TDS, you can consider this also.
4. One good way to give tax benefit to your employees is to give reasonable amount of PF contribution. This component and the interest earned on this is Tax benefit. This should not add cost to your company as you can show both components in CTC
Thanks for the valuable inputs to the topic.
I have one doubt regarding the PF contribution in the salary break up.
What the law says:
Can we include PF contribution from employer as well as emplyee in the CTC to increase the CTC amount or only employee contribution have to be shown.
I have seen, companies have their own way of doing this.
This is a comp n ben query...
In a usual salary break up - the the component called "Special Allowance" is a balancing figure. The practise followed across the industry is that the the amount for special allowance (i.e. the balancing figure) should not be more than the "Basic OR Basic+Dearness Allowance".
1. I m not sure whether it should not be more than only Basic or combination of Basic+DA
2. I would like to know if there is any law supproting this practise.
Because as i understand - If the basic is less, then it has a tax implication. In such case i would have to refer to the correct reference/clause as per law which will support the practise.
Looking forward for some help on the above raised query.
Thanks in anticipation![/b]
In reference to your query, i would like to clarify that, there is no law which states that spl allowance should not be more than Basic. But as a practise , most of the companies follows the rule of giving basic in between 30-50% of CTC.( mind it, there is again no law for that).
Recently we appointed vice- president - Finance in our company. We
follow Basic+DA = 40% , HRA =20%, CCA = 15% , Spl Allow = 20% and
What could be the new break ups for VP level appointment that includes tax benefits.Please suggest me....
Check this how does this sounds for the salary breakup:
Please let me know if in the % column has a limit set by Income tax:
Gross 100% 100% - (825+800+1250)
Exempted CCA 825
Exempted Conveyance Allowance 800
Exempted Medical Allowance 1250
Exempted Mobile Allowance 2.3
Exempted PDR Allowance 2.77
Exempted Sodhexo Pass 5.54
Exempted LTA 4.61
Other Allowance 17.17