Salary Breakdown Confusion: Can You Help Me Get the Calculations Right?

Hello members,

I am unsure about the accurate salary calculations. Please find the attachment here. Basic is 40% of the net, and HRA is 50% of basic. There is no DA. The components are fixed, but I would like to know the correct apportionment. Please help, as this is very urgent.

Thanks in advance,
Sukanya

Hi,

Everything is pretty fine with it, though you can make some modifications like limiting the employer contribution of PF to 780 rupees. But again, it's a policy decision you have to check out with your management if they would like to limit their contribution to PF.

Regards,
Jai

Hi,

There is no Conveyance Allowance (Rs. 800/-). Basic should be calculated on CTC, not on the Net Pay. Otherwise, everything is fine.

Regards,
Sujan

Don't worry. The structure is absolutely fine. However, it is not a tax-friendly structure.

Hi,

This stack-up sheet lacks Conveyance allowance (Rs.800 per month) as Sujan says (check if they have LTA instead) and also lacks Mediclaim (Rs.1250 per month); though they provide you with Medical Insurance & Accidental Insurance Premium, these should most often be over and above your CTC.

Your CTC is fully taxable, so chat with your HR to inquire if this CTC can be made more tax-friendly by having LTA reimbursement or any other Fringe Benefits.

Otherwise, this structure looks fine.

Thanks,
Meena Kumari R
HR Specialist

I deeply thank the members for these inputs. But would like to know, how is the conveyance calculated. Ms. Meena and Mr. Vali, you have suggested Rs 800 for conveyance, which is 3.05% of the gross. Is that the percentage that we consider for apportioning conveyance??

Also, Ms. Meena, there is LTA present in the structure in CTC. So can the employee get a tax benefit here.

Thanks,
Sukanya

Hi Meena Kumari R,

Conveyance is most often a fixed amount in the salary component and is Rs. 800 per month (Rs. 9600 pa). (I don't think it's calculated in percentages).

LTA is a tax benefit given by the employer. You can claim it by producing your travel receipts/bills; otherwise, this amount will be paid to you at the end of the year and will be fully taxable.

Thanks, HR Specialist

Hi Sukanya,

Usually, the Conveyance allowance has been set at Rs 800 per month. As per the IT Act, it is non-taxable up to Rs 800 per month, meaning it would help the employee save on taxes.

There is no ruling that it cannot exceed Rs 800 per month.

Regarding LTA, it is a non-taxable component provided the employee submits bills. An employee can avail it twice within a block of 4 years, as defined in the IT Act. I think the current block is 2006 - 2009.

LTA is an optional component that organizations may choose to offer employees to provide them with a tax-saving option.

I hope this brings more clarity.

Regards

Dear Sukanya,

When you say Cost to company PF contribution from "EMPLOYEES" do not add to CTC, please find breakup of the salary structure of the individual who is having a gross salary of 3.0 lakhs as per your percentage basis only:

- Basic: 120,000.00
- HR: 48,000.00
- MCA: 78,000.00
- Special allowance: 54,000.00

Total Gross salary is 3,00,000.00. To this, add PF EMPLOYER CONTRIBUTION INCLUDING EDLI & PF ADMIN CHARGES OF 16,332. Add LT & Medical/accidental insurance of 12,000 + 1,158 + 506. Hence, his Total CTC would be 329,996.00 (approximately 3.3 lakhs).

PF "Employees" contribution is not part of CTC (since the same is being deducted from the employee's gross salary). If you are adding this to his special allowance and then deducting from his salary, the employee will be taxed on special allowance (in extra) and PF benefit on taxation will be nullified.

Regards,
Rajeev

Hi Rajeev and Mukul,

I would like to have some information on LTC from all of you members. Mukul, as you have said that LTC can be availed twice in a block of 4 years, is it also applicable for the service industry?

One question: if we are allotting LTC of Rs. 12000/- and the employee is not able to avail it or does not apply for it, will his LTC be carried forward or get exhausted?

Also, in LTC, the employee enjoys tax benefits, but what about the employer? If the employer has to pay taxes for the benefit, how do we convince them to include it in the CTC of all employees?

I would require your comments on the above.

Regards,
Sukanya

Hi members,

Until now, I have come to know that every company has its own computation based on the industries. However, none have provided or prescribed how TDS can be deducted as every employee declares their savings at the last month of every financial year. In actual positions or otherwise, everyone has their own ideas to save on tax, okay?

My direct question is, what is the tax rate of TDS on salary slab-wise?

🤔

Dear Sukanya,

Thank you to Rajeev and Mukul for your insights. I would like to request information on LTC from all members.

Mukul, you mentioned that LTC can be utilized twice within a block of 4 years. Does this also apply to the service industry?

I have a question: If we allocate LTC amounting to Rs. 12000/- and the employee does not utilize it or apply for it, will the LTC carry forward or will it be forfeited?

Regarding LTC, employees enjoy tax benefits, but what about the employer? If the employer is required to pay taxes for this benefit, how can we persuade them to incorporate it into the CTC for all employees?

I would appreciate your feedback on the above.

Regards,
Sukanya

Dear Sukanya,

1) LTC or LTA is applicable across all industries.
2) As per income tax regulations, LTC can be carried forward to the next year. However, company policies may restrict this practice. In industries with high turnover rates, it may be more practical to pay out the LTC at year-end and tax it rather than carry it forward due to tracking difficulties in large organizations. The decision to carry forward or make a payment (taxable if not claimed) depends on the company's policy.

3) LTC/LTA is not taxable for employees (exemptions under Sec 10). It does not fall under fringe benefit taxation, so employers are also not taxed on it. You can proceed with adding this component to the CTC without tax implications for the employer.

Regards,
Rajeev

HI,
Income tax calcualations is common it does not differ from companies to companies( calcualations will remain the same since there are Specific sections & exeptions where in all companies has to follow it).
Every company has their own salary structure & taxes will be calcuated based upon their Total gross income.
tax rates for the current FY is
Net taxable income( after all deductions & exemptions from respective sec)
Taxable income slab (Rs.) Rate (%)Up to 1,50,000- nil
Up to 1,80,000 (for women)-nil
Up to 2,25,000 (for resident individual of 65 years or above)NIL
1,50,001 – 3,00,000-10%
3,00,001 – 5,00,000 -20&
5,000,001 upwards 30%
A surcharge of 10 per cent of the total tax liability is applicable where the total income exceeds Rs 1,000,000.
Education cess is applicable @ 3 per cent on income tax, inclusive of surcharge if there is any.
Regards
rajeev

Hi, I am new to the forum and I need help with the salary breakdown. Can someone help me by showing me the most tax-friendly salary package for CTC of 15 lakhs? Thank you Sue.