Confused About PF Calculation on Gross Salary? Need Help Understanding My Pay Structure

Hi all,

In my company, they are calculating PF on the gross with a ceiling limit of Rs 15,000. They were asking me to do it in the format below, but I am not able to understand, and they don't have complete knowledge as they are blindly following their consultant. I tried to reach him, but he is not responding. The breakup is as follows:

Basic: 5206
HRA: 2082
Conveyance Allowance: 1600
Other Allowances: 4127
Gross: 13015
PF Employer: 1562 (On gross)
ESI Employer: 423
PT: 150
CTC: 15000
Take-home salary is Rs 10878.

Can anyone explain to me in detail the above structure?

Thanks & Regards

Understanding Salary Components and Deductions

To the best of my understanding, the Basic is 40% of your Gross Amount. 40% of Basic is your HRA. Conveyance allowance is Rs. 1600/-, which is as per the Income Tax Exemption Limit, and the balance is taken as Other Allowances.

PF Contribution Calculation

The PF contribution of the employer is wrongly calculated as 12% on Gross Salary; on the contrary, it should be 12% on Gross Salary less HRA. Kindly check the PF Amendment of April 2019.

ESI Contribution Calculation

Even the ESI Contribution of the employer is wrongly calculated. It's 3.25% on gross salary. Kindly check the recent amendment notice of ESIC w.e.f. July 01, 2019.

Simplifying Salary Structure at the 15,000 CTC Level

There is no need to complicate the salary structure at the 15,000/- CTC level, which is not taxable. Considering the minimum wage, recent verdict of the Supreme Court, etc., it may be a simple pay structure as follows:

Basic - 11,850.00
HRA - 1,185.00 (10% of Basic)

Monthly gross - 13,035.00
Employer PF - 1,541.00 (13% including Admin charge, etc.)
Employer ESI - 424.00 (3.25% from 01.07.2019)

CTC - 15,000.00

PT (Professional Tax) is not part of CTC as it is paid by the employee. It is possible to maintain 10% HRA of Basic up to 15,000.00. In the minimum wages definition, HRA is also included. Moreover, in some states of India (WB, Maharashtra, etc.), as per state act, 5% minimum HRA is required to pay.

Above 15,000.00 Basic, the HRA can be tapered off (Higher the Basic, higher % of HRA) and also consider ITAX effective pockets at a higher salary level.

Thanks & Regards,
S K Bandyopadhyay (WB, Howrah)

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Dear Friend,

Greetings!!

First and foremost, I wish to know the level of expertise of the person whose salary has to be calculated - skilled, semi-skilled, or unskilled. After that, the basic salary will be decided.

Subsequently, I need to understand how your company calculates the employer's PF in trend, so that I can provide my inputs.

Rgds