Understanding Salary Breakdown: How Do You Calculate Gross, Net, and Benefits?

Hi, as there is a lot of difference between practical and theoretical knowledge, I want to know, "how to do the salary breakup?" If you are offering a 4 LPA salary to the employee, then how will the breakup be? For example, what would be the gross salary, net salary, basic salary, HRA, LTA, PF, etc.?

Thanks & Regards,
Madhavi

You can fix a percentage for each component, and the balancing figure would be any other allowance. For example, Basic — % of CTC, HRA — % of Basic, LTA — % of Basic, and the balance is other allowance. Always keep the basic salary as the base, and the highest percentage may be 50%, so you could get the balance figure. Please keep the management in the loop and do this for all employees; it will help you in the appraisal as well.

Regards,
Jitendra

There is no hard and fast rule; each company follows a certain structure. When designing the structure, the tax outgo may be kept in mind so that there is minimal tax outgo for the employee.

Generally, the basic can be fixed up to 60% of the gross salary, HRA can be 50% of the basic, conveyance can be up to the maximum of tax-deductible, and the rest can be apportioned as other allowances or allowances that have a tax benefit.

Take care.

Hi, this is Sreelatha.

Basic Salary and CTC

1. Is the basic salary supposed to be 60% of the total salary, or can we reduce it? If it is possible to reduce it, by how much percentage can we reduce it, and what does CTC mean? How is it utilized by the employer?

PF and ESI Accounts

2. If registered companies do not have PF and ESI accounts, will any problems occur for the employer? Are there any chances to reduce the employer's contribution to paying the PF for the staff?

Regards,
Sreelatha

Basic salary varies from company to company, typically falling in the range of 35-40% of CTC. The higher the basic salary, the more advantageous it is for employees as they will receive an equivalent contribution to their PF from the employer's side. Although the employer's PF contribution is included in the CTC, it ultimately boosts the employee's savings.

Registered companies are required to have PF and ESI registration. The PF contribution can be capped at a maximum of INR 6500 of the basic salary for the purpose of employer contributions.

Regards,
Pon