How to Keep Take-Home Pay Unchanged When Adding PF and ESI Deductions?

Presently, we don't have P.F Tax, EPF, ESI (which is actually called Payroll/Salary Breakup). However, we are expecting to avail these facilities from the next financial year. So, how do we calculate the salary breakup as our current salary (in hand with no deductions) should remain the same.

How to calculate the salary break up as per my current salary Rs. 22,000 (CTC)? I want to know the PF 12% break up.

Understanding Salary Components: PF, ESIC, and PT

PF is calculated on the basic salary. 12% of an employee's basic salary is contributed towards EPF. ESIC is calculated on the gross salary, with 1.75% of an employee's gross salary being contributed towards ESIC. PT is calculated statewise.

Suggestions for Salary Restructuring

1. You can restructure the current salary, which is the in-hand salary. Start adding breakdowns like HRA, Special Allowance, Travel Allowance, etc., as per the convenience of the company.

2. Alternatively, you can break down the entire salary according to various categories, which will ultimately affect your in-hand salary.

Regards, Nikhil Patki

The deduction of PF-ESI is subject to registration with the department. If the number of employees in your organization has reached the minimum required, as specified in the acts, then you have to apply for the registrations immediately, and deductions should be made accordingly.

However, if you are doing it on a voluntary basis, then it can be done as per your preferences. Before deductions start, you have to define the salary structure in a way that maximizes the in-hand salary with lower statutory costs to the company and lower Income Tax deduction (TDS). There are different criteria (depending on the CTC level, number of employees, industry, etc.) to define the salary structure as per requirements.

If you are not legally bound for the registration, then the gross salary and net salary (in hand) will be the same. Fellow members can shed more light on the matter.

Regards