New CTC Scale for Industries: What Are Your Thoughts on Its Impact?

Hi all,

This is the new CTC scale for industries related. Let me know how it is.

Regards,
Shankar

Thank you, Shankar. This will definitely help us to understand our salary and tax factors more conveniently. Thank you for the valuable effort.

Regards,
Anuradha

Hello Shankar Ravi,

I liked the posting you have made, but I am not clear on the concept of CCA & CON. Could you please highlight the same?

Also, I would like to mention that the Professional Tax is Rs. 200 throughout the year, except in February, where it is Rs. 300. It would be great if you could include this in the post.

Thanks,
Shriya Karve.

Very good. But I have a suggestion. Please do not show the employer's contribution to EPF/ESI in the payslip. I agree that these are costs to the company, but showing it in the payslip will be interpreted as deducting the employer's share of contribution from the salary of employees, which is illegal.

Similarly, annual payments based on profits like Bonus (which is paid only to those whose salary does not exceed Rs 10,000) should also be avoided in the monthly payslip. Once it is shown, it becomes a commitment on the part of the employer.

I didn't understand the practice of adding 20% of the basic salary (I presume) as part of CTC and then showing 8.33% as a deduction. Please clarify.

Regards, Madhu.T.K

CCA stands for City Compensation Allowance at 10% of the basic salary. Con. refers to Conveyance at 10% of the basic salary.

One more thing to note is that I am unsure if the P.T. slab has changed. To the best of my knowledge, the P.T. slab has been revised to start from Rs. 5001/-. Could you please confirm if this information is correct? If you have any updates, kindly inform me.

Thank you,
Shankar

Mr. Madhu,

In the CTC scale, 20% of the bonus is calculated on the basic salary, and 11.73% shall be added to every month's salary. The remaining 8.33% (approximately one basic salary per year) shall be given once a year. Also, note that, apart from ESI & PT deductions, the remaining deduction shows as savings.

I hope you understand.

Regards, Shankar

Hi Shankar,

I was about to ask about what Madhu asked. I have gone through your reply but it is still not clear to me. Can you please elaborate on the percentage for the bonus (20% - 8.33%)?

- Hiten

Dear Mr. Shankar,

I am very sorry; I could not follow you. 20% and 8.33% are the maximum and the minimum bonus payable as per the Payment of Bonus Act. Any percentage of bonus above 8.33% will be decided only after considering the 'available surplus,' which in turn depends on the net profit as shown by the Profit & Loss account. How can an employee say that he will be able to pay a 20% bonus every year? Of course, 8.33% is a statutory bonus that has to be paid even if the company incurs a loss. Therefore, it is justifiable to show the amount of the minimum bonus as part of the remuneration to the employee. (I prefer not to use the term "Cost to Company" because there are many benefits to the company as well due to the employment of a worker.)

I did not mean to disturb your system, but I meant to say that showing the employer's share of contributions to EPF/ESI could be interpreted as deducting his own share from the salary, which is illegal. Above all, the practice of "CTC" itself is a game to attract poor candidates as it gives a good picture, but in reality, nothing actually materializes.

Regards,

Madhu.T.K

Dear Friend,

Basic: 55%
House Rental Allowance: 25%
City Compensation Allowance: 10%
Conveyance: 10%
Total (Gross): 100%

Company Contributions:
Bonus: 20% on basic
PF: 12% on basic (if basic is Rs. 6500/-, the company fixes Rs. 780/-)
ESI: 4.75% on basic
Total, called CTC: 100% + 36.75%

Employee Contributions:
PF: 12% on basic
ESI: 1.75% on basic
PT: depends on gross

Now, your doubt is that in 20% of the bonus, 11.73% shall be added to his salary (called advance bonus), i.e., 8.33% shall be deducted from every month's salary. The same may be given once a month. Here, the company has fixed the CTC and is not involved in any kind of payment modes.

Thank you,
Regards,
Shankar

Hi,

Thank you for your suggestion, and the same may be discussed with our undersigned.

Thanking you,
Regards,

I have a doubt. Is the P.T. slab changed? And I heard that it starts from Rs. 5001? Please let me know.

Hi Shankar,

The work looks good, but I would suggest you increase the HRA to 50% of the basic salary. Otherwise, employees with higher salaries will have to pay a lot of tax.

Cheers,
Vinit

Dear all,

I also agree with Madhu. If you show the bonus monthly, it will attract the PF calculation amount, and in this case, the PF amount will increase.

My dear Shankar,

Is a salary slip (the so-called CTC) just to show a huge figure by adding up what other costs the employer will incur due to the employment of one person? Then why is the PF contribution restricted to 12% of 6500 only? If PF is deducted from the whole, then naturally, the employer should contribute to the same extent. (Only segregation of PF amount to Provident Fund and Pension Fund takes a different treatment.)

I am still confused about the bonus treatment. I agree that a bonus is a part of CTC, and if you want to show it as part of the salary, you can. But my concern is relating to the percentage of the bonus, which is purely dependent on production and profit.

Regards,
Madhu.T.K

Dear Shankarravik,

The PT slab for Andhra Pradesh changed w.e.f. 1-1-2008. There is no PT up to 5000; the rest is okay. This salary adjustment will help junior staff. What about senior staff? I suggest we should give them 45% or 50% HRA so that if they are claiming rent, they will benefit.

Regards,
Joseph

Hi,

The thought of creating such a calculator is appreciated and valued. However, there are a few points that require thorough checking. For instance, you have set the basic pay at almost 70% of the gross salary, but in reality, no private company sets the basic at 70%. The industry standard typically ranges between 45-60%, with 50% of the gross being the norm.

Regarding the bonus liability at 8.33%, it is only applicable up to a gross salary of Rs. 10,000, beyond which there is no compulsion on the employer. Additionally, it is important to note that the bonus is paid based on the employee's salary and not just the basic pay.

Warm regards,
Umesh Chaudhary
welcomeumesh@yahoo.com

Hi,

The CTC break up is fine except that the Bonus should be Rs. 3500 per year (for 8.33%), i.e., Rs. 292 per month for employees drawing a Basic salary of Rs. 3500 and above. Furthermore, you can also show the premium for Gratuity, which is normally 4.25% of the basic salary.

Regards,
Subrato :)

Hi,

Thank you for sharing such a nice piece of information. I have one query. Could you please let me know for which location or area it is applicable and from when it is effective?

Please do let me know.

Regards,
Priya

Thank you for the informative input. I appreciate it. Can you please assist me in creating a new salary slip that can help in reducing the taxable amount and also in enticing my employees by including additional allowances and benefits?

Regards,
Meghamadhulika

Hi Shankar,

Thank you for posting such useful information. I have a doubt regarding the slab rates mentioned here. For example, is it 2001 - 3000 for Rs. 25, or is it 2000 - 2999 for Rs. 25, and so on? Could you please verify this and provide me with clear information?

Thank you,
Radhi

Thank you, Shankar. Where do you get all these materials? Anyhow, I am learning new things by citing HR; the main contribution belongs to you.

With regards,
Muthukumar

Good Dear,

Now the government has changed the PT rate: 0-3k Nil, 3k-6k 80, 6k-9k 100, 9k-10k 150, >12k 200.

As per my information, please check and update in your sheet.

Let me tell you all, as per the Income Tax Act, HRA should be 40% of the basic, and in metro cities, it should be 50%.

I think the format needs to be revised and verified.

Regards,
Saurabh Sharma
Cadbury India Ltd.

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