Should I Accept a Higher CTC Offer with a Lower Basic Salary? Seeking Advice!

Hi, I got a new offer from a mid-level company. My current CTC is 4.2, and I received an offer for 6 as CTC. However, my basic salary is lower compared to my current employer. Please suggest whether I should accept this offer. I have attached my current payslip and the offered CTC for your reference.

My Current Employer's Monthly CTC:

Earnings:
- Basic: 17,500
- HRA: 7,000
- Conveyance: 1,600
- Medical Allowance: 1,250
- Special Allowance: 5,600
- Total Earnings: 32,950.00

Deductions:
- TDS: 0
- EPF: 1,800
- ESI: 0
- Profession Tax: 183
- Total Deductions: 1,983
- Net Pay: 30,967.00

Offered CTC Per Month:

- Basic: 13,000
- HRA: 7,800
- Conveyance: 800
- Medical Allowance: 1,250
- Special Allowance: 24,726
- Gross Salary: 47,576

Statutory Benefits:
- PF Employer Contribution: 1,800
- Gratuity: 624
- Sub Total: 2,424
- CTC Total: 50,000

Regards.

Your in-hand salary is higher in the new offer. You should look at the total earnings (i.e., what you get in hand). The basic component will not matter.

The effect of both is the same, except for the increase in salary. The basic will be useful only to calculate the statutory calculation of PF, Bonus, and Gratuity. In your case, the P.F. is restricted to Rs. 15,000/- of basic in both cases. Gratuity is added as part of CTC, which is not normally included in CTC since it is only eligible if you have continuous service of 5 years in a company. If your salary, including basic + DA, is more than Rs. 15,000/-, you are out of the scope of the Payment of Bonus Act. Therefore, you can very well accept the offer even though the basic is less than in your previous employment.

Understanding Salary Structure and Tax Exemptions

The salary structure is classified into various categories to obtain tax exemptions for HRA, which is based on basic salary and DA. Washing allowances are exempted. Calculate statutory amounts like PF, Gratuity, etc., all based on basic plus Dearness Allowance only.

However, a lower basic salary will result in lesser tax benefits indirectly. For instance, HRA exemption is based on 40% of basic and DA, or actual HRA received, or rent paid less 10% of basic, whichever is less. If your actual HRA is more, but your basic is less, there is a possibility of a reduced tax exemption.

CTC is classified into various components to do tax planning and help employees save tax on their income.