How Do You Design a Salary Structure That Balances Employee Needs and Tax Compliance?

Designing a Salary Structure

When designing a salary structure, it is important to consider all salary heads for both taxable and non-taxable incomes.

Common salary heads that are typically included in a salary structure are basic salary, allowances, bonuses, incentives, and benefits such as health insurance or retirement contributions.

By incorporating these salary components effectively, an organization can ensure a comprehensive and competitive salary structure that meets the needs of its employees while also staying compliant with tax regulations.

Salary Structure for Taxable Salaried Employees

- Basic
- HRA
- Conveyance Allowance
- Medical Allowance
- Office Wear Allowance
- Special Allowance

Salary Structure for Non-Taxable Salaried Employees

- Basic
- DA
- HRA
- Conveyance Allowance

Regards,
Sheeja Nair, Mumbai

Generally, there are the following heads in a salary structure:

1. **Basic**: Normally 50% of the Gross Pay and not less than the minimum wages act, fully taxable.
2. **HRA**: Varies from place to place. All metro cities will have 40%, and other cities it is 30%. If paid more than the limit, it is considered taxable income.
3. **Conveyance/Transport Allowance**: Limited up to Rs. 800/- per month, and above that is taxable.
4. **Medical Allowance**: Limited up to Rs. 1250/- per month, and above that is taxable.
5. **Special Allowance, Bonuses, Incentives, etc.**: You shall plan, but all those are taxable only.

Debit Heads

- PT
- PF
- ESI
- TDS
- Loan Repayment
- Salary Advance
- Other Deductions

I hope this helps! Let me know if you need further clarification or assistance.