Understanding Salary Breakup: How to Clearly Explain PF Contributions to Candidates

Hi,

My company deducts both 12% employer and 12% employee contributions from CTC. We have a breakup as Basic, HRA, Medical, Conveyance, and Special Allowance. Please help me with a proper breakup so that if a candidate wants to know his net salary, it is clear to them.

Hi,

According to me, you will get the net pay after deducting the PF, ESI (if applicable), and any other deductions from the Salary Break parameters that you have mentioned, as well as any incentives (if any).

Correct me if I am wrong.

Regards, Amith R.

Hi,

Yes, that's right. The net salary will be after the deduction of PF. However, if I include this PF amount in CTC, it will increase. Should I show PF separately as it is a deduction?

Thank you.

Hi,

As far as my knowledge goes, I think CTC is the one that includes everything, so there is no other way that PF can be shown separately. Please correct me if I am wrong in this.

Regards,
Amith R.

Hi,

Can you give me an idea, e.g., CTC is 2.4 Lakhs. Basic is 40% which is 8000. HRA is 6000, which is 30%. Medical is 1250. Conveyance is 800. Special allowance is the balance figure. Employer contribution is 12% of the Basic, and employee contribution is 12% of the Basic.

Basic: 8000
HRA: 6000
Medical: 1250
Conveyance: 800
Special Allowance (SA): balance figure

If I show the PF amount, the CTC will increase. How can I show the PF amount without increasing the CTC?

Dear,

The PF amount will be 12% of the basic salary, i.e., Rs. 960. The net salary of the person will be Basic + HRA + Conveyance + Special Allowance - Rs. 960 (Contribution from the Employee's side). Medical allowance is not added because it is given on a yearly basis.

However, in the CTC calculation, you will need to add the employee's contribution, which will be Rs. 1089 (13.61% of Basic - 12% Employer's contribution + 1.61 EDLI and Admin Charges).

Hi,

Our company policy states that a 12% employee and 12% employer contribution are part of the Cost to Company (CTC). Medical benefits are included in the salary breakup and given on a monthly basis. We require bills to be provided quarterly or yearly, and if they are not submitted, the amount will be considered as part of the taxable component.

Thank you.

Hi Ragni,

The contents of the salary breakup are as follows. You can prepare it according to your own suitability. HRA would be 50 or 60% of the basic salary.

- Basic
- HRA
- CCA - 825/- is exempted from tax
- Other Allowances
- Mobile Reimbursement
- Medical Reimbursement of 1250/month is exempted from tax

Gross Per Month = Sum of all the above.

Gross Per Annum = 12*Gross/Month

PF Contribution = 12% of Basic/Annum

ESI Contribution = 4.75% of Gross/Annum

Medical = The mediclaim facility provided to employees who are not covered under ESI as the maximum ceiling for ESI is 10000/Month. Getting more than this will be covered under Mediclaim or it depends on the company policy.

Ex-Gratia/Bonus = A fixed amount as a Bonus

Annual Fixed Gross Cost = Gross/Annum + Ex-gratia

Annual Total Cost = AFGC + PF + ESIC

Annual total cost is also called CTC.

I hope this information has helped to answer some of your queries.

Regards,
Amit Seth

Dear Ragni,

When we talk about CTC, we mention all expenditures which we spend on an employee in a year. Thus, it includes PF contribution of the employer (12%), Gratuity Contribution of the employer (4.81%), and if ESIC is applicable, ESIC @ 4.75%.

If an employee's CTC is Rs. 240,000, the emoluments (as per your mentioned percentages of Basic and HRA), the CTC would be as follows:

Amount %age
Basic 8000 40%
HRA 6000 30%
Medical 1250
Conv. 800
Special 2990
Gross 19040

PF 960 12%
Yearly Basic 96000
Yearly HRA 72000
Yearly medi 15000
Yearly conv. 9600
Yearly Special 35880
Yearly PF Cont. 11520
240000

Warm regards,
Umesh Chaudhary
(welcomeumesh@yahoo.com)

How to calculate the PF and split up on what basis. Explain about 1.61% A/c nos and full details about that. Please help me. :icon1::confused: