Understanding PF and Gratuity Deductions: How Should They Be Applied to CTC?

Hi All,

Can anyone help me out with the understanding of general PF deduction rules? If we consider an employee's salary on a CTC basis, how much percentage of PF should be deducted? Similarly, with regards to gratuity, when we mention that the salary is based on CTC, is it correct to deduct gratuity from the very first month of a candidate's joining?

Dear PF is always deducted on basic + DA at a fixed percentage, and the employer also contributes at that rate. For example, if your salary is Basic 5000, DA 2000, HRA 2000, other allowances 3000, and incentives 4000, your PF will be deducted on Rs. 5000 at a rate of 12%, i.e., Rs. 600. The employer will also contribute the same amount. So, the CTC will be 5000 + 2000 + 2000 + 3000 + 4000 + 600, totaling 16600.

Thanks for the reply,

In some companies, the employer states that in the CTC, PF rate is 24% of the basic salary, which means both employer and employee contributions will be deducted. Is it correct to deduct PF contributions from both sides?

Regards

CTC is the cost to the company, so it does not include any deductions made on behalf of the employee, like employee contribution to PF, TDS, etc. Some companies mention 24% PF contributions to add clarity to the structure and avoid confusion later.

Can anyone tell me how we divide salary into the structure of:

- Basic
- HRA
- DA
- Conveyance
- Etc.

Is there any hardcore rule, or can we set all these as per the company's preference?

Hi, it is company-specific. I am uploading one of the files available in this forum for your reference.

Regards,
Vishwanath

Dear Mr. Vishwanath,

I have reviewed the salary sheet you sent. Please explain to me what PT is. Why have you taken a uniform allowance of Rs. 1000/- and a medical allowance of Rs. 650/-?

Regards,
Arti Chopra

Professional Tax Salary Tax (Rs)

5001-6000: 60
6001-10000: 80
10001-15000: 100
15001-20000: 150
20000 and above: 200

Thank you.

Dear Manasa,

I haven't heard about Professional Tax being included in the Salary Structure. Could you please clarify if it is compulsory or optional for the company?

Thank you.

Hi,

I am an accountant. I want to know if it is mandatory for an employer to deduct PF, should they also deduct the ESI?

Can anyone tell me the ways of reducing debtors? Like factoring, debt securitization, and channel financing. Please tell me about those methods that can be easily applied in a company. Also, how can we assess the creditworthiness of customers?

Waiting for your reply.

Thanks and Regards,
Reeetu Chaudhary

Dear Ritu,

This is not the correct forum to raise your query. Please put this query in the finance forum; from there, you may get some response.

Regards,
J. S. Malik

Dear Reetu,

The amount of Gratuity paid under The Payment of Gratuity Act is exempted under the Income Tax Act up to the tune of Rs. 350,000.00. Any amount over and above Rs. 3.5 Lac shall be taxable in the hands of an employee.

Thanks,
Mohd. Arif Khan

Dear Mr. Vishwanath,

I appreciate the example you have set in explaining the salary breakup. The formulas are also well laid out. However, I want to express a doubt regarding how an employee can attract ESI when his/her gross salary exceeds Rs. 10,000 per month. Kindly remove the ESI factor and repost if possible. Additionally, you may include Superannuation and gratuity deductions with the appropriate percentages.

Best Regards,
Shriya Karve

Hi,

I have one question. Could you please tell me if the brackets/range represent the base salary or the gross/net?

Regards,
Tarun

Hi Snigdha,

Don't give PT slabs like this without any information on the State and effective dates. There are so many documents available here in CiteHR state-wise.

Regards,
Arul Prakash D.