Confused About CTC Breakup Details? Need Help Understanding HRA and Allowances

To all seniors,

I am working as an HR Executive. Our company wants to mention the CTC breakup in the appointment letter. One of my seniors gave me a breakup which is mentioned below:

CTC Breakup Details

- Gross Salary: ₹21,000 per month
- Annual CTC: ₹2,52,000
- Bonus: ₹12,600 (yearly paid basic)
- Basic: ₹12,600
- HRA: ₹3,675
- Other Allowances: ₹3,675

I am unable to understand how he calculated HRA and Other Allowances. Please explain to me in detail.

Hi Rani, Generally, when we do the salary bifurcation, we keep in mind the following percentages, which help in minimizing the TDS:

- Basic - 40% of Gross
- HRA - 30% of Basic
- Conveyance - $800 per month (As per the law)
- Other Allowance - Rest of the amount (This amount can be used fully or partially as business-related expenses (Fringe Benefits) to avoid the huge taxes).

Thanks,

Salary Breakdown Explanation

Gross - $500,000
Basic - 40% of $500,000 = $200,000
HRA - 30% of $200,000 = $60,000
Conveyance - $800 per month * 12 = $9,600
Other Allowances = $230,400

Hope this is clear now.

Which law is restricting the Conveyance allowance to only Rs. 800? Many companies are paying more than that (even I am getting more). Please clarify about the restriction on conveyance allowance.

Attached is the format of the CTC breakup for your reference. Tax savings must be considered when organizing the various salary components.

Thanks and regards,
Bijay

Hi,

The OA is nothing but the balance amount. The HRA is 12% of the basic and depends on the location/company. The other name for OA is a special allowance. SPA is taxable, and you can claim benefits for HRA by producing rent agreements and receipts.

If you have any more doubts, please contact me.

Regards,
Venkatesh.P
[Phone Number Removed For Privacy Reasons]

Venkatesh,

Where did you read that HRA is 12% of basics? HRA is 50% of basics for metro cities and 40% of basics in non-metro cities.

What you MUST know about HRA

Under the Income Tax Act, Medical Allowance is a maximum of ₹1,250 per month (₹15,000 per year), and Conveyance Allowance is ₹800 per month (₹9,600 per year).

Hi all, I found the salary bifurcation posted by Bijay is totally incorrect because there is no ESI deduction/contribution. As per the rule, up to Rs. 15,000 gross salary, ESI is a must.

Hi Sanjeev, the content was very useful. I had a good discussion with the finance management team today. However, there is a small correction - our finance team mentioned that the conveyance allowance should not exceed 9,600, and the medical allowance should not exceed 15,000. Please verify this information and confirm.

Thank you.

Conveyance Allowance Clarification

Conveyance Allowance cannot be 2,400/- INR. In this particular case, it can only be 800/- INR, and the remaining 1,600/- INR should be shown as Other Allowance.

Kindly note that a Conveyance Allowance of only 800/- INR per month (9,600/- INR per annum) is exempted under Income Tax. Any amount exceeding 800/- INR under this category will be taxable. For example, in this case, only 800/- INR will be exempted under Income Tax, and the remaining 1,600/- will be taxable. The company might have decided to allocate 1,500/- INR under the Medical Allowance category to ensure that amount is exempted under Income Tax.

Hi, this is Mrunalini working as an HR Officer. I have a query: is workmen's compensation and personal accident insurance calculated in CTC? Please reply at the earliest.

Thanks & Regards,

If the company has hired any insurance company, then we can calculate workmen's compensation and personal accident in CTC.

Thanks,
Regards,
J.N. Modi

CTC Breakup

HRA - 50% (Metro Cities) on basic
- 40% (non-Metro) on basic

Conveyance - $800 per month

Regards

Personal accident cover can be mentioned in CTC only in cases where it isn't a part of mandatory compliance.

Thank you for the above information. Please note that the Conveyance Allowance should not exceed ₹9,600 per annum, while the Medical Allowance should not exceed ₹15,000 per annum.

Regards,
Ashi Rana

I am working in a Construction Company as an HR executive. I am receiving a take-home salary of 12,330 with a CTC package of 150,000. I require a salary breakup. Additionally, could you please explain the difference between Gross and CTC? How should Form 16 be calculated in the salary structure, and what is the significance of the BOCW Act in a construction company?

Please provide the necessary information.

Thank you,

Regards,
M. Santhosh Kumar
[Phone Number Removed For Privacy Reasons]

Hi everyone, can anyone guide me on this? If the salary of the employee is $17,500, then what will be the deduction for PF and ESI?

Regards,
Nikithaa

I would like to add one more thing here. "Basic" should be higher than all other components.

Regards,
James

Gross Salary Breakup

The gross salary breakup is as follows:

- Basic: 7,500 (50% of Gross Salary)
- HRA: 3,000 (40% of Basic Salary)
- Medical Allowance: 1,250
- Conveyance Allowance: 800
- Special Allowance: 2,450 (Not D.A)

Thanks & Regards,
Laxman Dalavi
[Phone Number Removed For Privacy Reasons]