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Monthly Components Basic
Guidelines As per Bombay Chamber of Commerce guidelines Minimum Basic figure for skilled, semi skilled and un skilled employees should be minimum of Rs.3550 (Unskilled), 3650(Semi-Skilled) and 3750/-(Skilled). However to be on safer side, do not keep Basic figure less than Rs.3750/- p.m. Income Tax Benefit: NIL Maximum 50% basic (Metro cities) 40% basic (non metro cities). Income Tax Benefit: Excess of Actual rent paid over 10% of Basic salary OR Maximum HRA allowed (50% or 60% of basic) OR Actual Rent Paid – whichever is lower is Exempt from Tax. For example. Basic Rs.20000/HRA Rs.10000/Actual Rent Rs.8000/Excess of actual rent paid over 10% of Basic (10%x20000 – 8000) Rs.6000 Hence max exemption allowed is lowest i.e. Rs.6000/subject to Rent Receipts of Rs.6000/- only Supposed to be conveyance allowance meant for transportation between office and residence only. Income Tax Benefit: Exempt maximum up to Rs.800/- per month. No proof required. Income Tax Benefit: Rs.100 per child subject to max 2 children. Hence maximum Rs.200/- is exempt Balancing figure – after choosing all the above components with respect to their maximum limits absorbed, remaining amount can be named as Special Allowance. It is fully taxable. Can be given against bills or without bills does not matter. Some companies give it monthly, some quarterly, half yearly or yearly also. Some companies give it only against medical bills, some do not ask for bills, rather bills are only demanded for Final Tax Computation at the end of the year. No thumb rule about it. Preferred to pay monthly, without bills and ask bills as per your wish, quarterly, half yearly or at the end of the year. Do not choose to give it against bills only, there is no rule for the same…It only makes salary processing a cumbersome process. Income Tax Benefit: Maximum Rs.1250/- p.m. (Rs.15000 p.a.) is exempt only if Original Bills are provided. Non cash component, exempt up to Rs.1000/- p.m.
Amounts (per month) Rs.3750/- (minimum) maximum no limit..
House Rent Allowance (HRA)
Maximum allowed 50% Basic (Metro Cities) OR 40% Basic (Non Metro Cities)
Children’s education allowance Perquisite Allowance
Income Tax Benefit: Exemption will be on Actual expenses only. AMOUNT (per year) No Limit as such… ANNUAL COMPONENTS Leave Travel Allowance / Concession Gift Vouchers Between Rs.) GUIDELINES Income Tax effect: Taxable perquisite – Value of rent free accommodation considered taxable for the period of house occupied is either of the following: For Private Sector Employees 10% of Salary (for metro cities) or (7. For junior employees amount can be lower. Hotel. However employee must have proof of leaves taken for travel purpose and should be away from office for at least 2 days in a year. Exemption is allowed only for two such journeys in the block of 4 years starting from 1986 – 89 onwards. for senior categories. GUIDELINES Journey within India primarily by Rail – 2nd A/c class for employee and his immediate family (spouse. However employee’s contribution is deducted from his Monthly salary above and sent to RPFC. employees 10% of Salary (for metro cities) or (7.3000/.5% for non metro cities) OR Fair Rent Value whichever is lower is AMOUNT (Per Year) . Where rail transport is not available. these coupon companies like Sodexho Pass also provide attractive Gift Vouchers. amount can be higher up to Rs. Income Tax Benefit: Employee’s contribution of 12% is eligible for Deduction from Taxable income. Market Rent – 60% of salary) = Total taxable value of rent-free acco. Income Tax Benefit: Please check with Tax consultants how much is exempt from taxable income. it is included here.e. children. Guest House. As per my knowledge. Hence total deduction works out to be 12+12 = 24% of Basic. siblings). equivalent Public Transport like Bus is also allowed equivalent to maximum 2nd AC Rail fair only.5% for non metro cities) + Excess of Fair Rent Value (market rent) over 60% of salary (i. Farmhouse.5000/- Amount (per month) 12% of Basic Gratuity 15 days monthly basic per year. It is an annual component but since it is retrial benefit. Can be paid any time in the year in part or in full whenever the employee claims it. it is not more than Rs. Caravan. which can be given on Diwali Festival Occasion. etc.to Rs. Air transport Y class is allowed only to Central Government employees.5000 or so.RETIRALS Provident Fund GUIDELINES Employer’s contribution (this is given to RPFC directly. It can be treated as exempt investment. Same on the lines of food coupons.5000/- For Senior Management Employees only PERQUISITES Rent Free Accommodation Owned or Managed by the Employer (Includes Flat. For PSU and Semi-Govt. parents.
Income Tax effect: Taxable Value will include the following – Actual Running & Maintenance expenditure incurred by the employer + Driver’s Salary + Depreciation – any amount charged by employer to employee for personal use of the car. Employee exercises his option by buying out the shares during the exercise period however tax liability occurs only when an employee sells the shares on the value of sale made under the Capital Gains head of income. so there is no logic to include this in CTC structure. D. It can be 10%. However it is not necessary.e. C. VP is purely performance driven and is not regular or fixed amount. we pay you accordingly. some insurance companies do. For example after Poor ratings.to Rs. Please check this with them before taking a cover for your employees. Bonus received. Grade. Hence it should always be kept out of main Salary Structure. first two children. All Allowances & Reimbursements (excluding Med.70000/. rather the depend on Maternity Benefit Act provisions. procedures to claim benefits are always tedious one. Hence there is no Performance consideration in Salary or CTC.500000/. fees etc. E.).e. this year average employees would get 30%-50% (i. Fair Rent – Market Rent or Municipal Valuation of Rent. parents or in-laws (either of them) etc. Because individual’s expectations from Salary as terminology differs than Incentives/ Variables etc Rather an independent and attractive Variable Pay or Incentive Structure can be designed and should be a part of Rewards & Awards Strategy of the organization. Incentives can be within the range of 0 to 100000. Designation of the employees. F then we can design incentive ranges like for Grade A. For example if you decide to keep 30% of Basic . Rs. For example if a company has Grades A. VARIABLE PAY / PERFORMANCE PAY / Incentives etc This is not a salary. where Rs. any commission.90000/-) etc.100000 to Rs. For them guidelines could be. Rs. Employee Stock Option Plan OTHER BENEFITS OUT OF CTC STRUCTURE BUT STILL FORM PART OF COMPENSATION Insurance Schemes – employees can be covered under following two schemes. Although most of the companies prefer to include this figure in CTC however it gives vague and unrealistic impression of Salary.0 is for poor and negative performance and 100000 is for Outstanding performers. whichever is Higher.Car (For personal) Owned by the Employer Taxable.and Excellent Rated employees can be given between 70-90% (i.30000/to 50000/-) Good employees can be given between 50% to 70% (i. Maternity Benefits – Some companies have their own maternity benefit schemes for their female employees and some companies don’t have. you can have Average or Good or Excellent Rated employees. Rs. B.50000/. you perform.70000 to Rs. 20% or 30% of Monthly Salary or Basic + Allowances as the case may be. • • • Personal Accident Insurance Scheme (for employee only) Medical Insurance Scheme (For employee & dependents which can be spouse. The policy covers may be kept between the range of Rs. Following parameters can be kept in mind.depending upon the hierarchies or grade system in your company. The objective of this is purely different than salary i. It can be Random figures with broad ranges depending on the Position. Reimb.e. The term ‘Salary’ will include total of the following: Basic. Some companies do not cover parents/in laws. you can choose either of the one approach.e. Similarly employees falling in between can be given %ages of this range. Having companies own scheme helps a lot because under the Act govt. Another approach can be percentage of CTC can be given as Incentives. Whereas objective of Salary is to ‘Regularly’ compensate an employee with a ‘Regular’ figure against the services extended by him towards the organization.
1000 (max) Total Monthly Salary – PF – Profession Tax ANNUALLY Amount (Rs. half yearly or yearly on a lump sum basis.500000/. OR up to Rs. you can further define eligibility on the basis of performance ratings as follows.Only for Senior Management Car Rent free Accommodation ESOP Any other Perks ANNUAL C.75000/.C. If someone’s CTC is Rs.e.3500 (min) 50% Basic (Metro cities) 40% Basic (Non Metro) Rs.T. (Incorporate any one of the following) Maximum Potential Incentives under PLIP will be 30% of Total Monthly Salary.200 (max) Balancing Figure Rs.) SALARY COMPONENT Basic HRA Transport Allowance Children’s Education Allowance Special Allowance Medical Reimbursements Food Coupons TOTAL MONTHLY SALARY Net Take Home Retrial Components Provident Fund (Employer. MONTHLY Amount (Rs. A Total Compensation Structure may look like this.+ Allowances as Variable Pay or Performance Incentives.5000 (max) As given in guidelines As given in guidelines As per company’s scheme OTHER BENEFITS Personal Accident Insurance Scheme – Rs. or you can choose to include this in monthly salary so that employees’ monthly income inflates regularly. Note: You can also choose how you would disburse the amounts of incentives.a. Or some companies disburse it quarterly. The decision can be based on your intentions whether you would like to give a lump sum big amount in the hands of an employee so that he can realize his big personal aspirations at one go.800 (max) Rs. However if he performs at ‘Good’ Rating. Mahesh K Prasad Head-Human Resources 09820775178 . the 100 % incentives for Outstanding performance.and his Basic + Allowances comes to 375000 then his eligibility for incentives comes out to be 30%x375000=112500 i.) Gratuity (15 days basic) Annual Components Leave Travel Allowance Gift Vouchers Perquisites . Each employee would be eligible for a performance based incentive plan based on following guidelines. he may be given say anywhere between 50-70% of 112500 as incentives. Contr.200000/Medical Insurance Scheme – Rs.1250 (max) Rs.) Rs. 13.200000/PERFORMANCE LINKED INCENTIVE PLAN The Performance Linked Incentive Plan will be based on employee’s Performance Ratings during our Annual Performance Appraisal Plan in the month of March / April each year.75% Basic 15 days Basic per anum No Limit Rs.p. In my opinion best will be to include incentive amount in the monthly salary of employee for next financial year….
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