Salary Breakdown Help: How Should I Allocate My 4 Lacs to Meet Tax and Legal Requirements?

My question is, if I get a salary of 4 lacs per annum, how much should be my MAX and MIN basic salary, special allowance, HRA, LTA, conveyance, etc.? I need a breakdown of the 4 lacs in line with the rules and regulations of income tax, labor laws, etc.

Hi,

I think every company has its own payroll formula. Like in my company, we prepare it as CTC/75000. Then it automatically calculates Basic, HRA, PF, DA, etc.

Thank you for your reply. Could you please explain the rationale behind the formula you are applying? I am particularly interested in that aspect.

Hi,

Every company follows its method of calculating the basics. The most appropriate method is that 40% of your package is your basic salary, and 50% of your basic salary is your HRA. For example, if the CTC is 210000, then your basic will be 7000 monthly, and your HRA will be 3500 monthly. I hope this will clear all your doubts. If you still have questions, please contact me at amanpreet_bedi@yahoo.com.

Regards,
Amanpreet Bedi

Thank you for your reply.

In your response, you mentioned that 50% of the basic salary is allocated to HRA for income tax purposes, but only 40% of the total salary (basic + DA + commission) is exempt. Of course, there are other conditions to consider. However, if you keep the HRA component equal to or less than 40%, it would simplify the calculations for income tax. (In metropolitan cities, 50% of the salary is exempt.)

My main goal is to determine if there is a law, rule, or act that specifies the fixation of the basic salary component.

Rutu

How to Calculate House Rent Allowance (HRA)

HR experts calculate HRA by considering three different factors:

• First, they calculate HRA as 12% of the basic salary.
• Secondly, they determine the excess rent over 10% of the basic salary.
• Finally, they compute either 50% of the basic salary in metro areas or 40% in non-metro areas, multiplied by 12.

Out of these three calculations, the lowest amount is considered as the final HRA value.