How Can I Design a Salary Breakup to Minimize Tax Deductions? Seeking Your Advice!

Dear Friends,

Hi, Kindly help me out in designing the salary breakup so that less tax is deducted. Help me out in selecting the heads for the salary breakup.

Thanks in advance,
Ritu

Hi Ritu,

The contents of the salary break-up are as below. 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. Employees getting more than this will be covered under Mediclaim or as per company policy.

Ex-Gratia/Bonus = A fixed amount as 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 clear your queries to some extent.

Regards,
Amit Seth.

Dear Amit,

What is CCA? City Compensation Allowance?

If yes, then can we also add another point of Conveyance Allowance, which is tax-exempt up to INR 800 per month, right?

Best Regards,
Tina

Hi Tina,

CCA is City Conveyance Allowance, which is the same as what you are saying. Actually, it is Rs. 825/-, which is exempted, but due to round figures, we keep it at Rs. 800/- only.

Regards,
Amit Seth.

Hi Amit!!!

I was going through the breakup given. Just need to confirm that ESI contribution from employees' salary is 1.75% of the basic salary and 4.75% is from the employer. Isn't it?

Thanks,
Mansi

Hi Amit,

I was going through the salary breakup given. I just need to confirm that the ESI contribution from the employee's salary is 1.75% of the basic salary, and 4.75% is from the employer. Isn't it?

Thanks,
Mansi