Need Help Creating a Salary Slip for Managing Director in a Startup Without PF or ESI

Hi Seniors, I am working in a BPO outsourcing company as an HR professional. My Managing Director asked me to create a salary slip for him with a CTC of ₹2,10,000. I have included all the details as per the rules. Since it is a startup venture (4 months old), we do not have any PF or ESI. Kindly review the details below:

Rate of Salary/Wages

a) Basic - ₹84,000.00 (40%)
b) House Rent Allowance - ₹33,600.00 (40%)
c) Conveyance - ₹800.00
d) Medical Allowance - ₹1,250.00
e) Mobile Allowance - ₹5,000.00
f) Special Allowance - ₹90,350.00

Total CTC: ₹2,10,000.00

Seniors, please advise me on any additional changes or additions I need to make. Your prompt assistance is highly appreciated.

Regards,
Sangeeta Debnath.

Hi Seniors, Some more points are mentioned below:

1. As this calculation is for a monthly basis, the CTC will be Rs. 2,10,000 (Two Lakh Ten Thousand Rupees) per month. Kindly let me know about the calculation and deductions I need to consider.

2. He told me to create a 3-month salary slip as he wants to apply for a credit card.

3. He is the Managing Director and Founder of the company.

4. There are no PF & ESI accounts.

I am a bit confused. Kindly help me out. Thanks in advance.

Regards, Sangeeta Debnath

Dear Sangeeta,

Bifurcation is fine as a startup venture, and you can add more tax-free (full or partial) heads as mentioned below. However, I suggest that you first fix the compensation policy followed by a grading system to avoid any hassle in the future.

1. Basic - Income

Tax Benefit: Fully Taxable

2. House Rent Allowance (HRA) - Maximum 50% basic (Metro cities) 40% basic (non-metro cities).

Tax Benefit: Excess of actual rent paid over 10% of Basic salary OR Maximum HRA allowed (50% or 60% of basic) OR Actual Rent Paid – whichever is lower is exempt from tax.

3. Transport Allowance - Supposed to be conveyance allowance meant for transportation between office and residence only.

Tax Benefit: Exempt maximum up to Rs.800/- per month. No proof required.

4. Children's Education Allowance - Tax Benefit: Rs.100 per child subject to a maximum of 2 children. Hence, a maximum of Rs.200/- is exempt.

5. Medical Allowances / Reimbursements - Can be given against bills or without bills; it does not matter. Some companies give it monthly, some quarterly, half-yearly, or yearly also. Some companies give it only against medical bills, some do not ask for bills; rather, bills are only demanded for Final Tax Computation at the end of the year. No thumb rule about it. Preferred to pay monthly, without bills, and ask for bills as per your wish, quarterly, half-yearly, or at the end of the year. Do not choose to give it against bills only; there is no rule for the same. It only makes salary processing a cumbersome process.

Tax Benefit: Maximum Rs.1250/- p.m. (Rs.15000 p.a.) is exempt only if Original Bills are provided.

6. Telephone Reimbursement: Exempted up to Rs.1500 per month (Need to produce bills) - Sec 10

7. Books & Periodical Reimbursement: Actual Expenses (Need to Produce Bills)

8. VM Reimbursement: Actual Expenses (Need to produce bills)

9. Special Allowances - Balancer (Fully Taxable)

Regards,

I need to know for the Managing Director, what should be the proper salary breakup? This is a huge CTC, Rs. 210,000 PM (Two Lakh Ten Thousand). As I mentioned above in my thread, is the salary breakup correct? I am issuing that format to employees, but I am a bit confused because here the Managing Director's CTC is very huge. So kindly suggest to me on that topic.

Thanks in advance.

Regards,
Sangeeta Debnath.

Kindly recheck your total mentioned above. It is coming to ₹2,15,000. The breakup is correct, and you can generate a salary slip with a deduction of professional tax as per the details placed below:

Karnataka Professional Tax Details

- Up to ₹9,999: Nil
- ₹10,000 to ₹14,999: ₹150
- ₹15,000 and above: ₹200

Source: http://pt.kar.nic.in/(S(enjefpml3y0u...T_Schedule.pdf

Regards,

Dear Sangeeta, I have gone through your query, but it's not clear from your posting whether your organization has a standard salary breakup or if a fixed amount is being transferred to employees' accounts or they receive payments in cash.

Upon reviewing your salary breakup, I noticed that your total CTC is stated as 210,000. However, upon recalculating, the total CTC should be 215,000. It is possible that mobile reimbursement has not been included. If so, please mention this in a note or after the CTC.

If you provide medical reimbursement, you may also consider offering LTA, as per company policy. LTA typically amounts to 15% of the basic salary, offering tax benefits. This LTA amount can be adjusted from the Special Allowance.

At a senior level, to save on taxes, certain reimbursements such as car hire reimbursement, entertainment reimbursement, etc., are usually added.

The rest appears to be in order. I would also like to remind you to prepare a salary slip. If you do not already have a format, it can easily be found on the internet.

Specifically, ensure that the salary slip includes the recipient's name, designation, date of joining, paid days (as the director's paid days will always be full), leave information, etc.

Whether you create the document in Excel or Word, be sure to convert it to PDF before sending it out.

All the Best!

Salary Break-up Details

You may keep the following break-up:

- Basic 40.0% = ₹84,000
- HRA 20.0% = ₹42,000
- Uniform Reimbursement 5.0% = ₹10,500
- Books & Periodicals Reimbursement 5.0% = ₹10,500
- Transportation Allowance 4.0% = ₹8,400
- Mobile Reimbursement 3.0% = ₹6,300
- Medical Reimbursement 2.0% = ₹4,200
- Leave Travel Allowance 9.0% = ₹18,900
- Special Allowance 12.0% = ₹25,200

Total 100.0% = ₹210,000

There must be deductions for P.Tax & I.Tax as per the rules applicable to your unit.

Regards,
RKB

As you may know, there are different views for different purposes. First of all, let me ask you this - for a credit card application purpose, such a detailed analysis may not be necessary. Probably the bank might ask you to attach the latest ITR.V (or other applicable form) as proof of filing his IT return, which should suffice the purpose. That's it.

Considerations for Founders and Managing Directors

Next, as the founder/MD, he must be a shareholder, assuming that yours must be either a partnership firm or a Ltd. Co., in which case he should be entitled to a share of the profits/(losses) (sorry to say this) of the firm. In this case, the so-called concept of 'salary' to him might require rethinking. However, if you are right to ask only for a CTC break-up irrespective of the above, then you might consider these options as well from the point of view of IT, etc.:

• Instead of transport allowance, he is entitled to an official car, in which case this allowance may not be necessary, as the allowance over and above the limit attracts tax. Also, you might consider only reimbursement against bills from a travel company for his official use. Otherwise, IT on 'perks' might be attracted.

• There is also an option of free or on concessional rent, a bungalow accommodation for him as a perk.

• He is also entitled to a certain amount as 'Entertainment Allowance' which is exempted from tax up to certain limits.

• Club membership

• Business promotion expenses

• Instead of medical allowance, consider reimbursement of medical expenses against bills.

• Similarly, LTA - instead of allowance, consider reimbursement against bills.

However, I would also suggest that if you have to do it rightly, better finalize this in consultation with your auditors who will have an overall view of your MD's status in the business.