One of our senior management employees requested HR to consider contributing 10% of his salary to the NPS account on behalf of the employer, with the same amount deducted from his salary. The management is okay with the request provided there is no impact on the CTC. Can we allow PF and NPS?
How do I restructure his CTC?
Option 1: Deduct 10% from the basic salary and deposit it to NPS. As his basic salary is reduced, this impacts PF, gratuity, superannuation, leave pay, and bonus. Employees may not agree.
Option 2: If I calculate as usual and then take 10%, the contribution is less.
Query 1: Tax Benefits and Company Impact
Will he be eligible to take a tax benefit on the full amount? What will the impact be on the company when we show this under employer expenses? Is it favorable for the company, the employee, or both? Help with clarification.
From India, Mumbai
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How do I restructure his CTC?
Option 1: Deduct 10% from the basic salary and deposit it to NPS. As his basic salary is reduced, this impacts PF, gratuity, superannuation, leave pay, and bonus. Employees may not agree.
Option 2: If I calculate as usual and then take 10%, the contribution is less.
Query 1: Tax Benefits and Company Impact
Will he be eligible to take a tax benefit on the full amount? What will the impact be on the company when we show this under employer expenses? Is it favorable for the company, the employee, or both? Help with clarification.
From India, Mumbai
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In Mumbai, India, an employee can contribute to both PF and NPS without impacting the CTC. To restructure the CTC while ensuring compliance and fairness, consider the following steps:
1. Communication: Clearly communicate the changes to the employee, emphasizing the benefits and implications.
2. CTC Adjustment: Adjust the CTC by reducing the basic salary by the NPS contribution amount to maintain the overall CTC.
3. Tax Implications: The employee can avail tax benefits on the NPS contribution within the specified limits.
4. Employer Expenses: Reflect the NPS contribution as an employer expense, ensuring accurate accounting and compliance.
5. Employee Agreement: Obtain the employee's consent in writing to formalize the arrangement and avoid future disputes.
6. Consultation: Seek advice from tax experts or consultants to ensure proper tax treatment and compliance with regulations.
By following these steps, you can facilitate the employee's request while maintaining transparency, compliance, and fairness for both the employee and the company.
From India, Gurugram
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541. Communication: Clearly communicate the changes to the employee, emphasizing the benefits and implications.
2. CTC Adjustment: Adjust the CTC by reducing the basic salary by the NPS contribution amount to maintain the overall CTC.
3. Tax Implications: The employee can avail tax benefits on the NPS contribution within the specified limits.
4. Employer Expenses: Reflect the NPS contribution as an employer expense, ensuring accurate accounting and compliance.
5. Employee Agreement: Obtain the employee's consent in writing to formalize the arrangement and avoid future disputes.
6. Consultation: Seek advice from tax experts or consultants to ensure proper tax treatment and compliance with regulations.
By following these steps, you can facilitate the employee's request while maintaining transparency, compliance, and fairness for both the employee and the company.
From India, Gurugram
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