Understanding Salary Breakdowns: How to Maximize Tax Exemptions and Include Ex-Gratia?

Salary Breakdown and Tax Exemptions

Can anybody please tell me the different breakdowns for various salary slabs with more tax exemptions? Can I also include an ex-gratia component as part of the monthly salary in the compensation details? We have deductions for PF and ESIC as well.

I hope for a quick response as it's urgent.

Thank you.

Regards,

First, consider the salary slabs, for example:

- Salary range between 10,000 to 20,000 falls under Band-1.
- Similarly, from 20,000 to 30,000 falls under Band-2.
- Likewise, from 30,000 to 40,000 falls under Band-3.

Now, based on this, you can design the CTC. If you design the CTC for Band-1 and Band-3 the same, then Band-3 employees will face higher taxable amounts. Therefore, provide more tax exemptions for Band-3 employees.

I hope you understand this concept. Additionally, Ex-Gratia is a part of the CTC and not a part of the monthly net salary. It is a fully taxable component.

Thanks for the reply. Can I add a special allowance as a part of the monthly salary, other than Ex-Gratia? Please suggest a salary break-up for three different slabs: 15,000 and below, 15,001-30,000, and 30,000 and above.

For ₹15,000:

- Basic: ₹7,500
- HRA: ₹3,000 (I have taken 40%, but please check if you fall under metro or non-metro)
- Conveyance: ₹1,000
- Special Allowance: ₹3,500

Special Allowance = Gross - All components

For ₹15,000-₹30,000:

- Basic: ₹15,000
- HRA: ₹6,000
- Medical: ₹2,500
- Conveyance: ₹1,000
- Special Allowance: ₹5,500

Now, you may have got the idea...

In that medical tax exemption is only 1250; the remaining amount will be taxable. Maybe you know the HRA tax exemption rule. Conveyance of 800 is tax-free, and the remaining amount is taxable.

Thank you.