How Can We Design a Tax-Friendly Salary Structure for a 10 Lacs CTC New Hire?

Hi,

Can anyone help in designing a salary structure for a CTC of 10 lacs for a new employee we are hiring? The design has to be such that tax liability is minimized.

Regards

Just basics to work out:

6 lakh basic
12% PF + 15% superannuation = 25%
Medical reimbursement as permitted (I suppose 15,000, as of now)
LTC, say 50,000
ESOPS (1-2 lakh to adjust the figure) (if senior enough in position)
Gratuity/leave, etc.
Subsidized electricity, etc., if possible.
Car in company scheme.
Petrol per month quota + per month maintenance, out of petrol quota.

Can you please send me a format about tax calculations involved with the salary, such as PT, IT, etc., while considering from the operator to manager level (Temp CL)? Also, how to calculate leave, leave with pay, and loss of pay (LOP) as per government norms.

Alternative Salary Structure Proposal

Another alternative is to do the following:

Ascertain the split of fixed, variable, and stock options/deferred cash. A good mix would depend on the level of the person (junior, mid-management, senior management, C-level).

I assume that a 10 lakh salary would be mid-management. Possible options:
- 70% fixed, 20% variable, and 10% deferred cash/stock options = 7 L + 2 L + 1 L

For the fixed salary, a possible structure is as follows:
- Basic = 40% of Fixed Pay
- Retirals = 12% PF, 4.81% Gratuity (both as a percentage of basic)
- HRA = 40% or 50% of basic (based on metro/non-metro)
- Medical = 15,000 p.a.
- LTA = one month's basic
- Conveyance = 9,600 p.a.

The balance would be a general allowance (i.e., 7 lakhs minus all of the above components) from which the employee can choose Sodexo (meal coupons), professional development, etc., capped at the maximum available amount within the general allowance bucket.

I hope this helps!