Salary Structure Changes: How to Balance Company Costs and Employee Tax Impact?

Hi Friends,

Could you please let me know of the problems involved in changing the present salary structure? Is there a violation to reduce basic/DA of the organization? What is the best pay structure for the organization where the outflow of the company is less and the employee tax impact will be reduced? Expecting your valuable opinion in this regard.

Dear Krishnan,
1. Salary Structure can only be changed twice in a financial year (I read it in some Act but don't remember which Act)
2. Yes, you can't reduce the Basic salary of an employee. However, you can devise the new salary structure at lower Basic / DA and apply it for new inductees of the organization.
To main the uniformity, I would not recommend two different salary structures in the same organization.
Remember that the PF contribution should be at the minimum wages rate of the State (i.e. Basic + DA = at least the Minimum Wages of the State)
3. For Tax exemption benefits, download the attachment - it has some case studies also.
4. You can have as many allowances as mush you want. However, remember the above and the points of the attachment.
I hope I have been able to answer your queries. For any further assistance, feel free to ask.
thanx,
Sweety Singh

Dear Sweety,

Where is your attachment? I am eagerly waiting for it.

I have a doubt - if we are restructuring salary, do we need to inform the Income Tax department, Provident Fund, and Employee State Insurance or not?