Struggling with CTC Breakdown: How Do You Accurately Allocate the Remaining Amount?

I need to know if there is a formula to break down the CTC. In the following example, I tried to break down a CTC of Rs. 10,000.00; however, I don’t get the desired results. I could definitely adjust the remaining Rs. 173.8 in the other allowances, but is that the right way to do it? All of your help would be highly appreciated.

CTC Breakdown Example

CTC = 10,000
Gross Assumption: 9,000

Proposed Breakup

- Basic @ 50% of Gross = Rs. 4,500.00
- HRA @ 50% of Basic = Rs. 2,250.00
- Conveyance = Rs. 800.00
- Education Allowance = Rs. 200.00
- Others = Rs. 1,250.00

Monthly Gross = Rs. 9,000

Employer Liabilities

- P.F. @ 13.61% of Basic = Rs. 612.45
- ESI @ 4.75% of Basic = Rs. 213.75

CTC = Gross + Liabilities
= 9,000 + 612.45 + 213.75 = Rs. 9,826.2

You have done the CTC breakup correctly. However, the Employer's liability for PF contribution should not be stated as 13.61%. Please only include 12% in the CTC. The remaining amount should be categorized as administrative charges and should not be added to the CTC breakup.

You can definitely adjust the remaining Rs. 173.8 in other allowances; it would be correct. PF Admin charges are to be considered as part of CTC, so the remaining part of the calculation is also correct. Please check the minimum wages for your area.

Thank you.

Can you tell me the relation between CTC and minimum wages, and how they are interconnected? Administrative charges are to be paid separately by an employer and should not be included in CTC. I have reviewed the CTC breakdowns of several top companies, and they do not include administrative charges in the CTC. I recommend that you refer to the CTC breakdowns of other companies for more information.

Regards,

I want to ask if you are saying that administrative charges should be included in the CTC. If so, one question arises: should the breakdown of the CTC provided to the employee be reflected in the payslip, showing administrative charges as a deduction? If this is the case, it seems quite unusual. Additionally, how would you factor this into TDS calculations?

As far as administrative charges are concerned, they cannot be included in the employee's CTC because they are expenditures for an employer towards statutory contributions that the employer has to pay to the government as per the norms given in the P.F. Act. Therefore, they can't be included in the employees' CTC. As an employer/organization, they have to incur such charges towards statutory obligations.

Thanks.

Understanding CTC and Its Components

CTC is a financial term; it means "cost to the company." If a company spends even a single rupee for an employee in any form, it becomes part of the CTC, including legal contributions. The term CTC is borrowed from finance, which is why all legal payments made by the employer are also part of CTC, including administrative charges. Minimum wages must be considered while preparing CTC since we should not pay less than the prescribed minimum wages; thus, it has a definite relation to CTC calculation.

Regarding Medical Allowance

Medical allowance is just a breakup part of the fixed salary. The ESIC Act does not mention anything about medical allowance. It can still be given even if the salary is higher than ₹15,000 per month.

Regards