As you know Salary Structure is details of your Salary, it is made with different types of salary component. Every country has some different types of compliance hence the salary component varies from one country to another country.
Generally, in Salary structure we take care below parts.
- Fixed Components
- Variable Components
- Statutory Component
- Benefits/Perquisites
- Other Components
Here is how a CTC/Salary Bifurcation looks like.
Basic Salary
Basic Salary is very important part of CTC bifurcation usually the amount we consider 40% to 50% of Total CTC, for example if your CTC is 50000 then your basic may be 20000.
Basic salary is fully taxable element of our CTC and there is certain compliance which we calculate on the Basic Salary for example PF is calculated on 12% of Basic, Gratuity we calculate on Basic, Bonus we calculate on Basic
In this way Basic is very important and primary component of Our CTC.
Dearness Allowance
As the word suggest compensating the effect of inflation, we consider Dearness Allowance.
It is mainly applicable on Government sector, or which follow the government pay structure special falling in the minimum wages Act which differ from state to state.
It is again fully taxable and play role like the Basic Salary.
House Rent Allowance
This is very beneficial in prospective of saving tax, those employees who are living in the rented house they avail the benefit of House Rent Allowance.
Under Section 10 (13A) an employee can save the tax by submitting the rent receipt/Rent Agreement.
Generally, we consider 40% of 50% of House Rent Allowance of Basic Salary.
There is Exemption calculation rule for getting the HRA exemption as per the income tax Act.
LTA (Leave Travel Allowance)
LTA is part of Salary which cover the cost of travel made by the employee when employee is on leave, if any employee is traveling Domestic (Only India) then employee has to submit the travel receipt to get exemption in Tax.
The are certain rules and regulations like employee should be the part of the travel, he or she should be granted leaves taken, it should be domestic travel etc.
Other Allowance
Children’s Education allowance: – It is paid for the children education expense for max 2 child and per child Rs 100
Meal Allowance- It is given to employee for meal allowance Rs 2200 PM is tax free in meal allowance reimbursement,
Uniform Allowance-: This allowance covers the unform cost, in income tax it is tax fee if it is required for work
Special allowance
If in your CTC if you have bifurcated Basic, HRA, LTA or any other component and if any balance amount is there then it will be in Component Special Allowance, hence it is fully taxable.
Performance Bonus and Incentives
Performance Bonus or Incentives are payable to employees for his good work it is linked with the employee performance.
Some companies provide Monthly, Quarterly or Annually Performance Bonus to their employee for their best performance. Again, it is fully Taxable income.
Provident Fund (PF)
It is benefit plane for the employees, so as per the PF act employee and employer both contribute 12% of his Basic Salary o PF account which is followed with UAN number.
Employees can check his PF construction on the EPFO portal with his UAN login, employee can withdrawal their PF amount on certain conditions.
You can see in deduction side 12% of your Basic Salary in your pays lip, some organization has 1800 PF contributions where it is based on EDLI Basic of Rs 15000 so if you calculate 12% of your Basic Salary then it will come 1800.
Profession Tax
Profession tax varies from state to state in some state Profession tax in not applicable like you can check for Delhi and Goa.
Every state has different PT slab as per their PT Gross the PT slab go change
The Maximum Contribution is 2500 Annual.
Gratuity
It is an amount which employee gets on his retirement or resignation after at lease five years of service.
While calculating Gratuity if you have completed 5 years 6 month then you will received gratuity of 6 years, if you have completed 5-year 5 Month 29 days then you will get gratuity for 5 years.
Formula :- Gratuity= Basic*15/26 *Number of Completed years.
Employee state Insurance (ESI)
It is social security benefit to employees which is basically for medical treatment of employees and their dependents.
So, employee whose gross is less than 21000 then he or she will be eligible for ESI, we deduct .75% of employee Gross Salary. Company reimbursement the payment to ESIC department deducted from salary including the company contribution of 3.25% of Gross.
TDS (Tax Deducted at Source)
So, each employee grad has different salary benchmark, according to the salary income employee fall under the income tax slab, current we have to slab Old Tax Regime and New Tax Regime.
It is employee’s choice which regime he opted for the tax calculations.
Above are the some basic component of salary which 95% company follows, in some organizations there are certain need where they created different types of Salary components.
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