Understanding Gross Salary: Are Incentives and Deductions Included?

Friends,

Kindly guide me in calculating the Gross salary. Is it inclusive of the Performance Incentive, PF employer deduction, Mediclaim Policy, and Gratuity?

If it is not inclusive of the Gross Salary, then what is the minimum basic salary to be maintained (Is it 35% - 40%)?

Please reply urgently.

Hameetha

Hi Hameetha,

The components of the salary breakup may be as below; you can prepare it according to your own suitability. HRA would be 40% or 50% of the basic salary.

- Basic

- HRA 40 - 50% is exempted from taxes, depending on the class of the city.

- CCA - 825/- is exempted from tax.

- Other Allowances

- Mobile Reimbursement

- Medical Reimbursement of 1250/month is exempted from tax.

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 who are not covered under ESI, as the maximum ceiling for ESI is 10000/Month. Getting more than this will be covered under Mediclaim or it depends on company policy.

EX-Gratia/Bonus = A fixed amount as Bonus.

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

Annual Total Cost = AFGC + PF + ESIC.

Annual total cost is also called CTC.

Apart from this, Food coupons, Holiday packages, and Furnishing items are included in their CTC.

I hope this clears your queries to some extent.

Regards,

Amit Seth.

Kindly reply to my query on the difference between CTC and Gross Salary.

Please check whether the following is current: Gross salary = Basic + DA + HRA + Special allowance + Conveyance + ANY OTHER ALLOWANCES. Does the Gross salary include MEDICLAIM POLICY COVERAGE + PF EMPLOYER CONTRIBUTION + GRATUITY + PERFORMANCE INCENTIVE?

Basic salary = 35-40% of Gross. Please correct me if I am wrong.

Kindly reply at the earliest.

Regards, Hameetha

Dear Hameetha,

CTC refers to Cost to Company. It includes all the costs which the company is paying directly or indirectly to the employee. Whereas, Gross salary refers to the amount given to an employee before deducting the PF, ESI, and other deductions.

Yes, Gross salary = Basic + DA + HRA + Special allowance + Conveyance + ANY OTHER ALLOWANCES.

No, MEDICLAIM POLICY COVERAGE + PF EMPLOYER CONTRIBUTION + GRATUITY + PERFORMANCE INCENTIVE are not part of Gross Salary. These are part of CTC.

There is no specific rule for the Basic Salary, but keeping it at least between 30-40% is common in the system.

Regards,
Amit Seth.