Salary Breakdown Puzzle: How Do You Calculate Components from a Take-Home Salary?

Hi all,

I want to know how to calculate salary breakups like Basic, HRA, EA, etc., from the take-home salary of a candidate (not from the CTC of a person). For example, if a candidate's take-home salary has been fixed at Rs. 10,000 per month, how do I frame the salary breakup from that?

Salary Breakup Components

Salary breakup is a critical part of compensation management. My suggestion is that whatever is agreed upon by the management to be paid to an employee should have the following components:

- Basic salary: minimum 50%
- HRA: 40% to 50% of Basic salary
- Conveyance Allowance: Amount exempt from Income tax for attending daily duty.

The balance amount can be given any terminology depending upon the location, as some amounts are non-taxable in certain areas. It is important to note that the minimum wages prescribed by the state government should not be further bifurcated to avoid EPF and ESI contributions, as these are need-based wages.

Plan your structure accordingly.

Regards

Can we calculate Basic, HRA, EA, Conveyance allowance from Net pay (i.e., Take-home salary)?

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Yes, it is possible to calculate Basic, HRA, EA, and Conveyance allowance from the Net pay. To do this, you would need to deduct any deductions, taxes, or other withholdings from the Net pay to arrive at the gross salary. Once you have the gross salary, you can then break it down into its components such as Basic, HRA, EA, and Conveyance allowance based on the predetermined percentages or amounts set by the company's policies.

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I hope this helps clarify how you can calculate the various components of the salary from the Net pay. Let me know if you need further assistance or information.

Hi,

Below is the rough calculation for a net pay of 10,000.

Particulars of Compensation Per Month:

Basic: 5000

HRA: 2000

Conveyance Allowance: 1600

Special Allowance: 2200

Food Allowance: 200

Vehicle Allowance: -

Gross: 11000

Deductions:

PF (12% of Basic): 600

ESIC (1.75% of Gross): 193

PT: 200

Total Deduction: 993

Net Pay - Take Home (Gross - Total Deduction): 10007

Thank you.

Thank you, Gadekarlina. Could you please share with me the calculation in Excel format (including formulas and calculations)? It would be very useful for me.

Hi,

Please find the attached CTC structure in Excel format.

Regards,
Lina