Navigating Salary Components Post-2006 Budget: How to Balance Employer FBT and Employee IT?

Hi Friends,

After the budget of 2006, how can we divide salary components while considering both FBT liabilities on the employer and IT on the employee? Can anybody help me with the percentage of components to be divided from the gross salary: BP, DA, HRA, Conveyance, EA, TA, etc.?

Best Regards,
Ramesh Kannan G

Dear friend,

There is no significant impact from the viewpoint of the 2006 budget. Generally speaking, the compensation structure can be modeled as follows:

Assuming that the CTC = 1000, the following breakup may be considered:
- Basic can be between 33% to 40% of the CTC.
- Consequent effect on retirements.
- The rest can be part of a cafeteria/flexible benefit, where you may have the following components:
- HRA up to 100% of the basic salary.
- Medical Reimbursement @ Rs. 15,000/- p.a. - please note this will have FBT implications.
- LTA limited to 5-10% of CTC - you can avoid this as it has FBT implications.
- Variable should be within the CTC @ 11-15% of the annual cost.

Hope this is of some use.

Regards,
mxsingh

Please, it will be helpful if you can provide the full words for these acronyms: FBT, CTC, HRA, LTA, BP, DA, EA, TA, etc.

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Please, it will be helpful if you can provide the full words for these acronyms: FBT, CTC, HRA, LTA, BP, DA, EA, TA, etc.

Hello,

Here are some common acronyms related to compensation and benefits:
- CTC: Cost to Company
- FBT: Fringe Benefit Tax
- HRA: House Rent Allowance
- LTA: Leave Travel Allowance
- DA: Dearness Allowance

Additionally, Ramesh, you can include a Conveyance Allowance of 9600/- per annum, which is tax-exempt.

Regards,
Soumya Shankar

FBT = Fringe Benefit Tax
CTC = Cost to Company
HRA = House Rent Allowance
LTA = Leave Travel Allowance
BP = Basic Pay (I guess)
DA = Dearness Allowance (I guess)
EA = Education Allowance (I guess)
TA... ????

Regards,