How Can Employers Design a Tax-Friendly Salary Structure to Ease Employee Burden?

Hi Smita,

To make a salary structure more tax-friendly, there are several strategies that can be employed. One common approach is to offer tax-free perks to employees. These perks can include benefits such as health insurance, meal allowances, transportation allowances, and childcare support. By providing these perks, the overall tax burden on employees can be reduced.

In addition to tax-free perks, employers can also consider structuring employee compensation in a way that minimizes tax liabilities. This can involve incorporating components such as bonuses, allowances, and reimbursements in a tax-efficient manner.

Overall, by carefully designing the salary structure and incorporating tax-friendly perks, employers can help alleviate the tax burden on their employees.

I hope this information helps. If you have any further questions, feel free to ask.

Best regards
Mumbai

Hi Smita,

The contents of the salary break up are as below. You can prepare it at your own convenience. HRA would be 50% or 60% of basic.

- Basic
- HRA
- CCA - 825/- is exempted from tax
- Other Allowance
- Mobile Reimbursement
- Medical Reimbursement of 1250/month is exempted from tax

Gross Per Month = Sum of all the above.

Gross Per Annum = 12 * Gross/Month

PF Contribution = 12% of Basic/Annum

ESI Contribution = 4.75% of Gross/Annum

Medical = The mediclaim facility provided to employees who are not covered under ESI, as the maximum ceiling for ESI is 10000/Month. Getting more than this will be covered under Mediclaim or it depends on company policy.

Ex-Gratia/Bonus = A fixed amount as Bonus

Annual Fixed Gross Cost = Gross/Annum + Ex-gratia

Annual Total Cost = AFGC + PF + ESIC

Annual total cost is also called as CTC. Apart from this, Food coupons, Holiday package, and Furnishing items are included in their CTC.

I hope this clarifies your queries to some extent.

Regards,
Amit Seth.