How Do I Break Down My Salary and Understand Medical Reimbursement Rules?

Dear All,

Salary Breakup Request

1) Kindly provide me with a salary breakup of 60,000/- according to the latest guidelines.

Medical Reimbursement Clarification

2) Does medical reimbursement fall under the standard deduction, or will it be calculated as the amount spent by the employee or 15,000, whichever is less? Please clarify which condition applies.

Gratuity and Bonuses Explanation

3) Kindly explain gratuity calculation and bonuses with examples.

Thank you.

Medical Reimbursement and Standard Deduction:
In India, Medical Reimbursement is not part of the standard deduction. It is typically calculated based on the actual amount spent by the employee or a fixed limit, whichever is lower. As per current tax laws, medical reimbursement up to INR 15,000 is exempt from tax. Therefore, if an employee spends less than INR 15,000 on medical expenses, the actual amount spent will be considered for reimbursement. However, if the employee spends more than INR 15,000, only INR 15,000 will be eligible for tax exemption.

Gratuity Calculation:
Gratuity is a statutory benefit provided to employees in India upon retirement or resignation. The formula for calculating gratuity is: (Last drawn salary * 15/26 * number of years of service). Here, the last drawn salary includes basic salary and dearness allowance. The factor 15/26 represents 15 days of salary for each completed year of service. For example, if an employee's last drawn salary is INR 50,000 and they have completed 10 years of service, the gratuity amount would be calculated as: (50,000 * 15/26 * 10).

Bonuses Calculation:
Bonuses in India are typically calculated as a percentage of the employee's annual salary. The percentage can vary based on the company's policies and performance metrics. For example, if an employee's annual salary is INR 6,00,000 and the company offers a bonus of 10%, the bonus amount would be: 6,00,000 * 10% = INR 60,000.

These calculations are subject to specific terms and conditions outlined in the company's policies and applicable labor laws. It's advisable to consult with HR or finance professionals for precise calculations based on individual circumstances.