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Components of Remuneration

Components of Remuneration

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Published by Ashis karmakar
Components of Remuneration
Components of Remuneration

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Published by: Ashis karmakar on Jan 16, 2013
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01/16/2013

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Components of Remuneration

Total Cost to Company (TCC)

This is the sum total of Total Fixed Pay and Performance Bonus.

Total Fixed Pay (TFP)

Total Fixed Pay represents the fixed component of total compensation, which is available for distribution between Basic, Monthly Allowances and Retiral Benefits (Provident Fund). Though the company also makes a provision for Gratuity as per statutory requirement, it is not included in the calculation of TFP or TCC.

The distribution of TFP amount across its various components has been re-worked in line with industry norms.

o

Basic:

By and large pegged at 35% of TFP. The basic salary shall be taxed as per the tax rate applicable.

o

Monthly Allowances:

The amount by which the expenditure actually incurred by the employee in payment of rent in respect of residential accommodation occupied by him exceeds one-tenth of the amount of basic salary due to the employee in respect of the relevant period. or 3. The current IT Act provides for relief to employees who receive house rent allowance from their employers to meet expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the employee. Kolkatta. one-half of the amount of basic salary due to the employee in respect of the relevant period. Delhi or Chennai. The actual amount of such allowance received by the employee in respect of the period during which the said accommodation was occupied by the employee during the year. 1. An amount equal to – i. and . The amount whichever is the least of a). HRA: Paid out on a monthly basis at 50% of Basic Pay. The rates applicable for HRA are described in the following paragraph. where such accommodation is situated at Mumbai. b) and c) stated below is not to be included in the total taxable income. 2.

an employee is not staying in a rented accommodation. where such accommodation is situated at any other place. two-fifths of the amount of basic salary due to the employee in respect of the relevant period.ii. the entire HRA shall be taxed as per the tax rate applicable. Family here means a) the spouse and the children of the employee and b) the . This amount shall be non-taxable. Balance amount (if any) shall be taxed as per the tax rate applicable. In case. By the 15th of March of the concerned financial year. Rent receipts in original need to be submitted for the same.  Transport Allowance: Fixed amount of Rs. employee shall submit proof of domiciliary medical expenses incurred by the employee or the dependent members of his/her family.  Medical Reimbursement: Monthly entitlement (shall not be more than Rs 15000 per annum as per current IT Act) will be paid out with salary every month. 800 to be paid on a monthly basis as part of salary.

Family here means a) the spouse and the children of the employee and b) the parents. brothers and sisters of the employee provided they are wholly or mainly dependent on the employee. if following basic conditions are satisfied: i. Balance amount shall be taxed as per the tax rate applicable. ii.parents. The monthly LTA entitlement will be paid with monthly payrolls. The exemption is admissible on the value of LTA for himself and his family in connection with his proceeding on leave to any place in India. Amount equivalent to the bills submitted (subject to a maximum of your annual entitlement as mentioned in Remuneration Details) shall be exempted from tax. .5 times Monthly Basic. brothers and sisters of the employee provided they are wholly or mainly dependent on the employee.  LTA: Employees are entitled to Leave Travel Assistance (LTA) calculated at 2. The exemption is admissible in respect of actual expenditure incurred for journeys performed not only by the employee but also by his family. Tax is exempted to value of Leave Travel Assistance (LTA) received by an employee.

The exemption can be availed only in respect of two journeys performed in a block of four calendar years. Where the journey is performed by air. iv. the exemption so availed will not be counted for purposes of regulating the future exemptions allowable for the succeeding block of four years. as the case may be.iii. exemption can be claimed provided he avails the assistance in the calendar year immediately following that block. If an employee does not avail LTA during the specified four-year block periods on one of the two permitted occasions. Where places of origin of journey and destination are connected by rail and the journey is performed by any mode of transport other than by air. For this purpose the current 4-year block as specified by IT laws is 2006-2009. Documents required for the same is ticket (original or copy) / travel agent bill (original) / petrol bill (original). an amount not exceeding the air-conditioned first class rail fare by the shortest route to the place of destination. Provided that the aforesaid limit shall not be applicable for children born before 1st October 1998 and also in case of multiple births after one child. This is popularly known as the “carry over” assistance. v. In such cases. Where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed between such places. an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination. and iii. ii. or on both occasions. The exemption will not be available to more than two surviving children. the amount eligible for exemption shall be: . The LTA exemption shall be an amount actually incurred on performance of such travel subject to following conditions: i. Employee shall submit the claim in the prescribed format along with the proofs regarding the same by the 15th of March of the financial year in which he avails the LTA.

It is calculated as follows: Total Fixed Pay Less.1. • Personal Pay: This is a balancing factor. an amount not exceeding the 1st class or deluxe class fare. as the case may be. Where no recognized public transport system exists. an amount equivalent to the air-conditioned first class rail fares. as if the journey had been performed by rail. and 2. on such transport by the shortest route to the place of destination. Where a recognized public transport system exists. for the distance of the journey by the shortest route. This amount is to be paid out on a monthly basis and shall be taxable as per the tax rate applicable. After distributing the salary amongst other heads. Amount equivalent to the bills submitted (subject to a maximum of your annual entitlement as mentioned in remuneration Details) shall be exempted from tax. the remaining portion is plugged in Personal Pay. Basic Pay HRA Transport Allowance . Balance amount shall be taxed as per the tax rate applicable.

The PF amount specified in your remuneration details is the employer's contribution towards PF. and tax deductions for the concerned financial year shall commence from the month of April onwards. the Income tax will be computed. Considering the investment proofs and the value of bills submitted. Same amount of PF will be deducted from your per month salary towards employee's contribution towards PF.Medical Reimbursement LTA PF • Provident Fund: The PF is calculated at the rate of 12% of monthly Basic Pay for all the employees and the employer makes an equal amount of contribution towards it. o Investment Proofs: Based on investment declaration made by you. the deduction of estimated tax shall commence from the month of February onwards. . it will be deemed that no investments are made and the tax shall be calculated accordingly. In absence of proofs. Investment proofs shall reach Payroll department by the 15th January of concerned financial year so as to enable them to consider it for tax calculation.

there will be some deductions from the monthly salary owing to certain compliances. ii. These deductions are: i. Professional Tax (as applicable) Income Tax (as applicable) Provident Fund (Employee's Contribution) . iii.• Deductions: As mentioned above.

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