I am seeking guidance from this esteemed panel regarding the percentage allocation for various salary components. I have illustrated three examples below and need advice on which calculation will yield the highest in-hand salary, keeping in mind all the necessary terms.
In Example 1, the special allowance percentage is higher compared to Example 2, where the conveyance and medical allowance percentages are kept at 30%. In Example 3, if the basic salary is kept high, then the in-hand salary comes out to be less.
Example 1: For a CTC of 10 lac, the components are calculated as follows:
Basic: 40% of CTC
HRA: 40% of basic
Conveyance: 15% of basic
Medical Allowance: 15% of basic
Special Allowance: the remaining difference (which is 64% of basic for this calculation)
Other usual contributions: PF-12%, Gratuity-4.81%, Bonus-21000 per year (fixed)
This results in a gross of 78030 and in-hand of 76030.
Example 2: For a CTC of 10 lac, with changed conveyance, medical, and special allowance percentages, the components are calculated as follows:
Basic: 40% of CTC
HRA: 40% of basic
Conveyance: 30% of basic
Medical Allowance: 30% of basic
Special Allowance: the remaining difference (which is 34% of basic for this calculation)
Other usual contributions: PF-12%, Gratuity-4.81%, Bonus-21000 per year (fixed)
This also results in a gross of 78030 and in-hand of 76030.
Example 3: For a CTC of 10 lac, with a higher basic salary percentage, the components are calculated as follows:
Basic: 45% of CTC
HRA: 40% of basic
Conveyance: 25% of basic
Medical Allowance: 25% of basic
Special Allowance: the remaining difference (which is 17% of basic for this calculation)
Other usual contributions: PF-12%, Gratuity-4.81%, Bonus-21000 per year (fixed)
This results in a gross of 77830 and in-hand of 75830.
I would appreciate your expert suggestions on the most accurate percentage calculations for the components mentioned above.
From India, Ahmedabad
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5In Example 1, the special allowance percentage is higher compared to Example 2, where the conveyance and medical allowance percentages are kept at 30%. In Example 3, if the basic salary is kept high, then the in-hand salary comes out to be less.
Example 1: For a CTC of 10 lac, the components are calculated as follows:
Basic: 40% of CTC
HRA: 40% of basic
Conveyance: 15% of basic
Medical Allowance: 15% of basic
Special Allowance: the remaining difference (which is 64% of basic for this calculation)
Other usual contributions: PF-12%, Gratuity-4.81%, Bonus-21000 per year (fixed)
This results in a gross of 78030 and in-hand of 76030.
Example 2: For a CTC of 10 lac, with changed conveyance, medical, and special allowance percentages, the components are calculated as follows:
Basic: 40% of CTC
HRA: 40% of basic
Conveyance: 30% of basic
Medical Allowance: 30% of basic
Special Allowance: the remaining difference (which is 34% of basic for this calculation)
Other usual contributions: PF-12%, Gratuity-4.81%, Bonus-21000 per year (fixed)
This also results in a gross of 78030 and in-hand of 76030.
Example 3: For a CTC of 10 lac, with a higher basic salary percentage, the components are calculated as follows:
Basic: 45% of CTC
HRA: 40% of basic
Conveyance: 25% of basic
Medical Allowance: 25% of basic
Special Allowance: the remaining difference (which is 17% of basic for this calculation)
Other usual contributions: PF-12%, Gratuity-4.81%, Bonus-21000 per year (fixed)
This results in a gross of 77830 and in-hand of 75830.
I would appreciate your expert suggestions on the most accurate percentage calculations for the components mentioned above.
From India, Ahmedabad
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The allocation of salary components can significantly impact the in-hand salary. However, it's important to note that the optimal allocation can vary depending on individual circumstances and the specific tax laws in your location.
In your case, based on the examples provided, Example 1 and Example 2 yield the same in-hand salary, while Example 3 results in a slightly lower in-hand salary due to the higher basic salary percentage. This is because a higher basic salary increases the PF contribution, which is deducted from the in-hand salary.
However, it's also important to consider the tax implications of each component:
- Basic Salary: This is fully taxable. A higher basic salary can increase your tax liability.
- HRA: The tax exemption on HRA is the least of Actual HRA Received, 50% of Salary in Metro (40% for non-metro), or Rent paid minus 10% of salary.
- Conveyance Allowance: This allowance is not taxable up to a certain limit as per the Income Tax Act.
- Medical Allowance: This allowance is also not taxable up to a certain limit as per the Income Tax Act.
- Special Allowance: This is fully taxable.
Given these considerations, Example 2 might be the most beneficial as it maximizes the non-taxable components (conveyance and medical allowance) while keeping the taxable components (basic salary and special allowance) at a moderate level. However, this is a general suggestion and the optimal allocation can vary depending on your specific circumstances. It would be advisable to consult with a tax advisor or use an online tax calculator to determine the best allocation for your situation.
From India, Gurugram
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In your case, based on the examples provided, Example 1 and Example 2 yield the same in-hand salary, while Example 3 results in a slightly lower in-hand salary due to the higher basic salary percentage. This is because a higher basic salary increases the PF contribution, which is deducted from the in-hand salary.
However, it's also important to consider the tax implications of each component:
- Basic Salary: This is fully taxable. A higher basic salary can increase your tax liability.
- HRA: The tax exemption on HRA is the least of Actual HRA Received, 50% of Salary in Metro (40% for non-metro), or Rent paid minus 10% of salary.
- Conveyance Allowance: This allowance is not taxable up to a certain limit as per the Income Tax Act.
- Medical Allowance: This allowance is also not taxable up to a certain limit as per the Income Tax Act.
- Special Allowance: This is fully taxable.
Given these considerations, Example 2 might be the most beneficial as it maximizes the non-taxable components (conveyance and medical allowance) while keeping the taxable components (basic salary and special allowance) at a moderate level. However, this is a general suggestion and the optimal allocation can vary depending on your specific circumstances. It would be advisable to consult with a tax advisor or use an online tax calculator to determine the best allocation for your situation.
From India, Gurugram
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