Struggling with Salary Breakup and Income Tax Calculation for a New Joiner – Need Your Guidance

Hi All,

Recently, I joined a placement consulting firm. I am supposed to create the salary breakups like Basic, HRA, DA, etc. I was very comfortable with this because all the employees are recruiters, and the CTC is not greater than 15k.

Recently, we have a new male joiner with a salary of 35k. Can anybody please help me with the salary bifurcation? Also, how do I calculate Income Tax (IT)? What is the procedure for calculating IT? On which basis do we consider it, is it Basic+HRA+DA or Basic+DA?

Please help me out and send the bifurcation procedure to my email ID.

Thanks in advance!

Priyanka

Hi Priyanka,

The components of the salary breakup may be as below. You can prepare it according to your own suitability. HRA would be 40 to 60% of the basic.

Basic

HRA

TA

Other Allowance

Mobile Reimbursement/Month

Gross Per Month = Sum of all the above.

Gross Per Annum = 12 * Gross/Month

PF Contribution = 12% of Basic/Annum

ESI Contribution = 4.75% of Gross/Annum

Medical = The mediclaim facility provided to employees not covered under ESI as the maximum ceiling for ESI is 10000/Month. Any amount exceeding this will be covered under Mediclaim or as per company policy.

Ex-Gratia/Bonus = A fixed amount as a bonus

Annual Fixed Gross Cost = Gross/Annum + Ex-gratia

Annual Total Cost = AFGC + PF + ESIC

Annual total cost is also called CTC.

Yes, PF and ESI contributions from the employer's side are included in the CTC.

As per government tax rules, separate ceilings have been set for both genders.

For Males - Those earning more than 1.1 lakhs/annum have to pay taxes.

For Females - this is 1.5 lakhs/annum.

Hope this helps you to prepare the same on your end.

Regards,

Amit Seth.

Amitji,

That was really useful for me... Thanks a lot. Depending upon the given criteria, I've created a salary breakup for one of my employees (Female). Her CTC is 22k.

Basic= 10000
HRA= 40% of Basic= 4000
DA= 20% of Basic= 2000
Conveyance= 800
Telephone Allowance= 1200
Medical Allowance= 1250
Petrol Allowance= 1950
Meal Allowance= 800
= 22000.

Will this do? Do I need to modify anything in the above-mentioned? On which basis is IT applicable? On Basic wage or on CTC? Please clarify this, sir.

Thanks in Advance!!!

Hi Swetha,

You have really done a good job. IT is calculated based on CTC, and for females earning above 1.5 lakhs per annum, it is considered taxable income. Within this salary structure, certain components are eligible for tax rebates while others are completely exempt. For instance, HRA, CCA, and medical allowance are fully exempt up to the limit you specified. There is also some exemption available for Mobile and Petrol expenses.

You may proceed with the same salary structure, but please note that this is her gross salary, not CTC. To calculate CTC, additional components provided by the company, such as PF contribution and Insurance benefits, need to be added.

Regards,
Amit Seth.

Hi Priyanka,

Thank you for your message! I appreciate your enthusiasm in managing the salary bifurcation. Here is the breakdown you provided:

Basic Wage: 15000
HRA: 40% of Basic = 6000
DA: 20% of Basic = 3000
Conveyance: 800
Telephone Allowance: 3000
Medical Allowance: 3000
Meal Allowance: 2000
Petrol Allowance: 2200
Total: 35000

In terms of calculating Income Tax (IT), it would be best to consult with the Finance Department for accuracy and compliance. They can provide detailed guidance on this matter.

Please feel free to reach out if you need further assistance. Thank you again for reaching out, and have a great day!

Best regards

Dear Priyanka,

Well prepared, but it would be better if you keep the basics low. This will lead to a higher in-hand salary and also help in tax-saving options for employees. Medical allowance should be kept at 1250/- as only this amount is exempted from taxes. You may consider adding more tax-saving components like educational allowance, books, periodicals, and so on.

Regards,

Amit Seth

Hi,

I am currently receiving a fixed salary without any benefits, but I am looking to switch jobs. At this time, the company is requesting a salary breakup. How can I break down my gross salary without a PF plan? I have missed out on many opportunities due to this issue. My current employer deducts TDS and education tax. Please advise me.

Hello all, can someone help me in creating a salary structure for new joiners?