Understanding Basic Salary Determination, CTC Breakdown, and Income Tax Planning in Employee Compens

How do we calculate BASIC when an organization does not provide the breakdown? The organization only mentions the CTC and nothing else. So, how do I determine the BASIC pay? Are there any fixed percentages?

Thanks

Please review the corrected text below:

Check this salary structure, which we are following:

Salary Head - CTC above 3.5 lakhs - below 3.5 lakhs

Basic: 30% on CTC; 26% on CTC

HRA: 40% on Basic; 40% on Basic

LTA: 5% on CTC; 10% on CTC

Conveyance: Rs. 9600/- per year fixed

Medical Reimbursement: Rs. 15000/- per year fixed

Other Allowances: Remaining in CTC

Regards,
Vijay

Hello,

Hey Vijay, you have not mentioned about the PF. Please check with your employer if they want to include the PF amount in CTC or not, from both sides or if it is excluded.

Thanks,
Mehra

Hello,

Hey Vijay, you have not mentioned about the PF. Please check with your employer if they want to include the PF amount in the CTC or not, from both sides or if it is excluded.

Thanks,
Mehra :)

Hi Vijay,

How did you arrive at a percentage of 30% for BASIC over CTC? I mean, on what basis was 30% fixed? Do we have any section defined, or is it by place, or is it by comp? :-(

Hi dear, when will you receive your salary with the addition of EPF or ESIC contributions from the employer if deducted? Otherwise, you won't receive it simply. Don't try to calculate because the company can add anything, such as providing meal coupons, fixed telephone bills, or anything else. Therefore, inquire about your gross salary:

- Basic: 4000
- HRA: 1200
- Gross: 5200
- Employer ESIC (4.75%): 247
- Employer EPF (12%): 480
- Meal coupon: 300
- Fixed mobile rent: 299
- Employer contribution of lunch: 250
- Net CTC: 6776

Dear all,

Please provide me with a salary breakdown for tax planning purposes based on a gross salary of Rs. 5.00 lakhs per annum. I would like the flexibility to manage my salary from the employer.

Dear Mehra & Bhuchi,

I have provided a brief description of the major components in CTC. Both employee and employer PF contributions are included in CTC. Additionally, there are other allowances such as petrol, entertainment, telephone, and driver salary allowances that will be reflected on the pay slip (for those with a CTC exceeding 3.5 lakhs).

Please advise me if I have forgotten anything!

Thank you.

Hi,

There are no hard and fast rules when it comes to determining the basic salary. Normally, the basic is determined at 30-40% (there is no law on this). The remaining amount is divided among various perks, as they are often called. I remember in one company about 20 years back, I took the complete salary as basic, which seemed strange at the time.

There are some advantages and some disadvantages to this approach. The advantages include:
- PF is deducted on the entire amount
- Leave salary is encashed on the entire amount
- Bonus is calculated on the entire salary
- LTA will be higher if it's calculated on the basic salary
- Sometimes, HRA, CCA, etc., will be given on a percentage basis of the basic salary

On the other hand, the disadvantages are:
- The entire salary will be considered for income tax purposes
- Your salary will be known to all

However, if you plan your savings and investments well, you may be able to navigate the income tax net. All in all, the normal practice is to keep the basic salary anywhere between 30% to 40%.

I hope this explanation suffices.

Regards,
Nagaraj

Hi,

Can an employer fix the basic salary amount to anything they want? One of my friends' CTC is 25,000, and the basic salary is only 1,300 rupees. Is this possible?