Salary Breakdown Confusion: Can Someone Help Verify My Calculations?

My current salary break-up is enclosed here, but I am unsure if the calculation is correct. Could someone please assist me in ensuring the accuracy of the salary breakdown? I am uncertain about the precise calculations. Please find the attachment.

Thanks & Regards,
Ashok

The calculations as per the enclosed sheet look confusing. Additionally, please review the percentage of actuals as required.

Components A

- Basic - 35% of 26K = 7800/-
- HRA - 20% = 5200/-
- City Compensatory Allowance - 30% = 7800/- (this includes Lunch, Medical, etc.)
- Employer's Contribution 12% of Basic or Rs. 780/-, whichever is less = 630/-
- Conveyance = 800/-
- Special Allowance = 3770/-
- Total = 26000/-

Components B

Less: Deductions

- P.F. (Employee's Contribution 12% of Basic or Rs. 780/-, whichever is less) = 630/-
- P.F. (Employer's Contribution 12% of Basic or Rs. 780/-, whichever is less) = 630/-
- Professional Tax = 200/-
- Total = 1760/-

Components A-B = 26000-1760 = 24240/-, which is your Net payable salary. Performance Bonus or Ex-gratia in excess.

I hope this clarifies your query.

Regards

Hi Ashok, The salary breakup is not correct. There is no rule for the basic salary. Usually, companies keep it between 30-40% of your monthly salary. You can keep it at 35% as mentioned in Sharmila's reply, which makes your Basic to 9100.

HRA Calculation

HRA has to be 50% of Basic, so the HRA will be 4550. For exemptions, you need to do calculations as per the 3 rules of HRA exemption.

Other Allowances

- Conveyance is 800.
- Medical is 1250 (if needed), given either as reimbursement or as a monthly allowance.
- PF is 12% of Basic, which will be 1092.
- Food Allowance ranges from 1500 to 2500.
- LTA is usually 1 month of Basic Salary for the whole year, but there is no hard and fast rule. It can be claimed 2 times in a 4-year block, given either as an allowance or reimbursement.

Special Allowance Calculation

Special Allowance = Gross Salary (26000) - (Basic + HRA + Conveyance + Medical + PF + Food Allowance + LTA).

Net Salary Calculation

Net is Gross - PF - Professional Tax (if applicable in your state).

Thank you.

Dear Mr. Ashok Sundar,

HRA Calculation

HRA - 20% = 5200/-. The minimum HRA should be 40% of Basic + DA. For Metro areas, it is 50%. So how does an HRA of 20% qualify?

City Compensatory Allowance

City compensatory allowance - 30% = 7800/- (this includes Lunch, Medical, etc.). Employers' Contribution is 12% of basic or Rs. 780/-, whichever is less = 630/-. Conveyance = 800/-. Special Allowance = 3770/-. Total = 26000/-.

City compensatory allowance is normally another name for Dearness Allowance, which is different from food/medical or other allowances. Instead of putting 3770 as a special allowance, we can allocate 1250 as medical allowance and the remaining as special allowance.

Components B

Less: Deduction

P.F. (Employees' Contribution 12% of Basic or Rs. 780/-, whichever is less) = 630/-. P.F. (Employers' Contribution 12% of Basic or Rs. 780/-, whichever is less) = 630/-. Professional Tax = 200/-. Total = 1760/-. Components A-B = 26000-1760 = 24240/- is your Net payable salary. Performance Bonus or Ex-gratia in excess. Hope this clarifies your query.

You mentioned Comp A (salary) - Comp B (deductions). Your deduction includes Employers' PF contribution, which IS NOT deducted from Salary. This would mean the Employee is only giving both contributions. Also, note PT has a slab (This is at least for Mumbai, I may be wrong for other cities, seniors please advise). For up to 5000 basic, PT is 0. 5000 to 10,000 basic, PT is 150 pm. 10,000+ basic, PT is 200 pm for Mar-Jan and 300 for Feb. In this case, PT = 150 and not 200.

Regards,

Dear Mr. Ashok, Ms. Ankita is correct. I would like to propose the salary breakdown as outlined below:

A.) Earnings:

- Basic (35% of Gross): 9100 (typically, companies set the basic between 30% to 40%)
- DA (30% of Basic): 2730
- HRA (50% of Basic + DA): 5915 (HRA is 50% of Basic & DA for metros and 40% for other cities)
- Conveyance: 800
- Employer's contribution in PF (12% of Basic or 780, whichever is lower): 780
- Medical Allowance: 1250
- Special & Other Allowance: 5425

Total Earnings: 26000

B.) Deductions:

- Employer's contribution in PF: 780
- PF deduction from Employee's Salary: 780
- Profession Tax: 150

Total Deductions: 1710

Net Salary: 24290

Seniors, please advise on any changes to the breakdown. Your input would be greatly appreciated.

Regards,
Prabhat

Apart from PT and PF deductions, I think TDS deductions are also there. Most companies deduct TDS per month rather than deducting tax for March's salary to provide a uniform salary every month.

Ankita, Thanks for your quick and valuable reply. I will consider your suggestion in the future.

HRA Update Inquiry

Again, can you update me regarding HRA? Is it compulsory to give 50% for metro cities and 40% for other cities, or does it vary from city to city? Is there any notification specifying that it should be 50% or 40%?

I need your help in updating the salary structure for my company starting from the accounting year...

Thanks,

Pratik

[QUOTE=pratik.dofe;2037361]

Ankita,

Thanks for your quick and valuable reply. I will consider your suggestion in my future endeavors. Can you update me regarding HRA? Is it compulsory to give 50% for metro areas and 40% for other cities, or does it vary from city to city? Is there a specific notification stating that it should be 50% or 40%? I would appreciate your assistance in updating the salary structure for my company for the upcoming accounting year.

Thanks,
Pratik

HRA Compliance

Yes, it is a statutory compliance to have HRA at 40% (50% for metros). Companies are allowed to give more than that, but this percentage serves as the bare minimum. You can find more information on:

1. 5 things you should know about HRA - 5 things you should know about HRA - NDTVProfit.com

2. Tax liability - Meaning of House Rent Allowance and HRA Exemption Calculation

Type 'HRA' in the search bar of this site to access other relevant discussions on the topic. I hope this information is helpful.