Ideal components of salary structure in India
1 .Basic salary + allowance
It is central component and the core of the salary structure. This is usually the largest component of the CTC that represents 40-45% of the total CTC. The base plays an important role in the definition of salary because other components such as Provident Fund, Gratuity and ESIC depend on it.
The high cost allocation (DA) was introduced as part of the salary to reduce the burden of inflation on salaried employees. This amount is generally established around 5% of the total CTC and, like the base component, also has an effect on PF, ESIC, etc.
2. Housing Allowance (HRA)
3. Leave the trip allowance (LTA)
4. Transportation allowance
The transportation allowance was eliminated as of April 2018. Employees do not need to collect or present proof of transportation.
5. Medical allowance
The exemption from the medical allowance was eliminated as of April 2018. Employees do not need to collect or present medical evidence.
6. Childrens education allowance
This component is paid for employee school fees and is tax deductible up to Rs. 100 per month for up to two children. Therefore, this amount is generally set to no more than Rs. 2,400 per year for an employee.
CTC calculation formula
In CTC Salary Distribution will be
(1) Basic Salary + HRA + DA
(2) Conveyance allowance+ Medical + Other / Special Allowance if any
(3) Employers Contribution for PF (12% of Basic)
Employers Contribution for ESIC (4.75% of Gross)
(4) Employees Contribution for PF (12% of Basic)
Employees Contribution for ESIC (1.75% of Gross)
Gross Salary = (1) + (2)
CTC = (1) + (2) + (3)
Net in Hand = (1) + (2) - (4) ...
Salary breaks up as:
Calculation of basic salary from CTC
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