Dear Lavanya,
In order to give answer for your query you need to mention your company polices, since policies differs from companies to companies. To my knowledge for fixing salary there is no hard-and-fast rule, it determines according to companies policy.
In general practice, Company will not give any consolidated payment to their regular staff. Some times companies pays consolidated pay to some categories for example if they hire a person for temporary basis or if some body in probationary period until they get regularized of their service they may offer consolidate amount. In such cases companies may pays in consolidated amount.
If company appoint a person on consultancy basis they will not break up his or her salary merely pay consolidated amount and deduct Income Tax (TDS) as per Income tax norms.
Coming to your main query……. To my knowledge and in general practice to give breakup it all depends on company policies. The main object is to breakup salary to follow statutory obligations like P.F, Gratuity, P.T, ESI, income tax etc simultaneously employee’s will be benefited.
For example………
If company want to fix Rs. 30,000/- as a salary to x person. Merely they bifurcate this amount into various components. As Basic, HRA, Conveyance, Medical Allowance, Special Allowance, LTA, Children Education Allowance etc…
If they bifurcate it facilitate to determinate their P.F, ESI, P.T and Income Tax as per statutory norms.
Further I am giving small example for better understating.
If salary is Rs. 30,000/-
Can give Basic 50% of Salary it is Rs. 15,000/- (as I said Basic determinates according to company policy and it varies from company to company)
HRA (40% on Basic incase 50% in metropolitan cities
Conveyance Rs. 800/- it is fixed and the maximum will be allowed as per IT norms (in case handicapped Rs. 1600/- P.M)
Medical Allowance Rs. 1250/- P.M it is fixed and the maximum will be allowed as per IT norms (against submission of bills)
Children Education Allowance Rs. 100/-P.M for one kid (maximum two kids) it is fixed and the maximum will be allowed as per IT norms
LTA it gives for the purpose of tax saving .To get exemption one should comply the rules as per IT norms. It can be availed two times in block of four years against submission of original bills.
Balance amount to be transferred to special allowance which is fully taxable.
While fixing Basic salary company has to consider all statutory obligations since the majority compliances based on Basic salary like P.F, Gratuity, HRA etc.
I hope you get some idea with my aforesaid information.
If you want more information just use search button which is on the top of left side, I am sure you will get an adequate information in this regard.
I wish you all the best.
Regards,
TSK