Salary Breakdown Help: How Does a 40,000 CTC Translate to Take-Home Pay?

Dear HR professionals, please provide me with the salary breakdown for a 40,000 CTC.

There is no standard rule for creating a salary breakup. A breakup should be prepared in such a way as to minimize tax liability. To achieve this, consider factors such as HRA, food vouchers, traveling, House Furnishing Allowance, Medical Reimbursement, Children's Education, Newspapers, and periodicals, etc. Please consult a tax consultant to create the breakup to minimize tax liability.

Suggested Salary Breakup

You can split the salary as follows:
- Basic: 60% of Gross
- HRA: 25% of Basic
- Conveyance: Rs. 800
- Refreshment: Rs. 1000
- Telephone: Rs. 1000
- Other allowances

Hope this helps you. Kindly cross-check with other salary breakups.

Salary Breakup of Rs. 40,000/-

- Basic Salary: Rs. 16,000/-
- HRA: Rs. 8,000/-
- Conv. Allowance: Rs. 4,000/-
- City Comp. Allowance: Rs. 4,000/-
- Mediclaim Allowance: Rs. 4,000/-
- Traveling Allowance: Rs. 4,000/-

Regards,
Radhey
[Phone Number Removed For Privacy Reasons]

I think a breakup for Rs. 40,000 should be like this:

Salary Breakdown for Rs. 40,000

- Basic Salary: 45% of 40,000, which is 18,000
- HRA: 40% of Basic, which is 7,200
- Education Allowance: 200
- Conveyance Allowance: 800
- Medical Allowance: 1,250
- Other Allowances: 12,550

Salary Breakdown for CTC

Total CTC: 50% should be Basic. Basic: 50% should be HRA. Travel: $800, and the remaining amount should be shown in special allowance.

Let me give you an idea of the break-up for any CTC assigned to an employee.

Basic Salary

- Basic salary: 50% of CTC (No thumb rule)

House Rent Allowance (HRA)

- HRA: 50% of Basic salary for "A" class cities and 40% for "B" class cities. P.S. cities under the minimum wages act.

Conveyance

- If a person's gross amount already shows that it's "taxable," you can't manipulate it abruptly to make it non-taxable. Try to fix conveyance in the ratio of the tax slab (for the non-taxable amount, keep it <= 800 per month, 9600 is the tax-free amount).

Other Allowances

- The rest of the amount should be adjusted accordingly in heads of Medical allowances, Education Allowances, Special Allowances, etc.

You can reduce the net salary amount by bifurcating the part into Gratuity, Bonus, and Earned leaves per month, but more or less, it's a kind of malpractice, and I won't advocate it.

Note

- Try to keep the amount of Basic salary in such a way that it won't cost too much in terms of contributions under various Labour acts, i.e., EPF, Bonus, Gratuity, etc.

I hope this could give you a better idea of what sorts of points should be taken into keen consideration while preparing a salary break-up.

Regards,
Manish Gupta

My dear friends have suggested the salary structure keeping in mind the income tax liability, but some of my friends have not considered the liability of PF (although it can be avoided within the available act for new members only). It is advisable to include the PF. There is no thumb rule for the break-up. However, as a sample, the break-up of Rs. 40,000/= CTC can be detailed below:

Sample Salary Breakdown for Rs. 40,000 CTC

- Basic Pay: 24,000
- PF: 3,266
- HRA: 7,200
- Food Voucher: 2,500
- Conveyance: 800
- Medical: 1,250
- Education Reimbursement: 1,500

Regards,
Vinay

You can take 40% as the basic of CTC, i.e.:

Salary Breakdown

Basic = 16000
HRA = 8000
Transport Reim = 5000
Medical Reim = 1000
Other Allowance = 5780
Gross Salary (A) = 35780/-
PF @ 12% = 1920
LTA @ 10% = 1600
Bonus = 700 (20% of Basic for Bonus calculation, i.e., 3500/-)
Total (B) = 4220
CTC (A+B) = 40000/-

Hope it will fulfill your query.

Regards