Hi,
I am in the process of setting up a startup and am about to hire a couple of people. Their salaries are 10 lakh and 14 lakh. Now, I don't want that even when they are getting such good packages, their take-home is peanuts. Can anyone please design a package for me that can ensure the maximum take-home salary for the 10 lakh and 14 lakh packages, keeping in mind Indian taxation laws? I shall be grateful to you as this will be a great help to a startup.
Thanks again,
Vishal
From United States, Saint Louis
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1I am in the process of setting up a startup and am about to hire a couple of people. Their salaries are 10 lakh and 14 lakh. Now, I don't want that even when they are getting such good packages, their take-home is peanuts. Can anyone please design a package for me that can ensure the maximum take-home salary for the 10 lakh and 14 lakh packages, keeping in mind Indian taxation laws? I shall be grateful to you as this will be a great help to a startup.
Thanks again,
Vishal
From United States, Saint Louis
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Hi Roshni, I am attaching one salary breakup in which i have also taken example of Gross salary:INR 14,00,000 lacs. Kindly see to it. Hope it helps !!
From India, Delhi
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From India, Delhi
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Thank you very much for your prompt response. I would appreciate it if you could provide some details on how to divide the salary of Rs. 10 lakh and Rs. 14 lakh.
@ Ekta - The Excel sheet is highly informative. I am curious to know what falls under the city compensatory allowance. I am planning to set up my office in Noida. Will there be any special considerations for that? After going through other discussions, I did not come across any mentions of a city allowance. Is it tax-deductible, or will we be required to pay FBT (Fringe Benefit Tax) on this?
From United States, Saint Louis
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@ Ekta - The Excel sheet is highly informative. I am curious to know what falls under the city compensatory allowance. I am planning to set up my office in Noida. Will there be any special considerations for that? After going through other discussions, I did not come across any mentions of a city allowance. Is it tax-deductible, or will we be required to pay FBT (Fringe Benefit Tax) on this?
From United States, Saint Louis
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check the enclosed computation. try more options at the given source therein.
From India, Gurgaon
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From India, Gurgaon
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Hi Vishal,
CCA is an allowance given to an employee to compensate for the rise in the cost of living in a given city. It is given to the employee at the discretion of the management. The objective of including this salary element is to provide an additional amount to meet the high expenses of employees living in metro cities like Mumbai, Delhi, Bangalore, etc. It is taxable. Usually, companies fix the amount of CCA, and it is completely the management's decision.
Refer to this thread also: https://www.citehr.com/388222-cca.html
Regards,
Ekta
From India, Delhi
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CCA is an allowance given to an employee to compensate for the rise in the cost of living in a given city. It is given to the employee at the discretion of the management. The objective of including this salary element is to provide an additional amount to meet the high expenses of employees living in metro cities like Mumbai, Delhi, Bangalore, etc. It is taxable. Usually, companies fix the amount of CCA, and it is completely the management's decision.
Refer to this thread also: https://www.citehr.com/388222-cca.html
Regards,
Ekta
From India, Delhi
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Vishal,
Plan your components of salary in such a way that it consists of some allowance which is paid for some difficult job or involving some risk elements, then it will be non-taxable.
Regards,
Pabitra
From India, Durgapur
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Plan your components of salary in such a way that it consists of some allowance which is paid for some difficult job or involving some risk elements, then it will be non-taxable.
Regards,
Pabitra
From India, Durgapur
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If your company is software you can not put under the head difficult job/ involves risks etc ... you can position it under special allowance for special skills. Regards, Nagesha
From India, Bangalore
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From India, Bangalore
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Hi,
Thanks for your responses. But somehow I am still confused. I wish to know about the Fringe tax benefit. Is this tax still applicable.
If yes, then what I think is that keeping the special allowance will help me put a lesser tax burden on my employee. As I understand the FBT is to be paid by the employer, but I can always make it a part of the employee's CTC. This way the employee, in broad terms, is paying FTB instead of income tax. So he is saving a lot of money.
Can you elaborate on this? I have read so many approaches to break up the salary. Some keep the basic salary as 50% of CTC, some 40%, and some 30%. What is the fundamental behind all this? I know EXACTLY what I want. I want my employee to pay a minimum on taxes so that he can take home the maximum. In a nutshell, I want the actual payout close to the CTC.
I will appreciate it if anyone can explain this to me. Thanks in anticipation.
Some info: My company is in Noida. I don't know if it comes under metro or not. And if there are any state taxes too.
Vishal
From United States, Saint Louis
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Thanks for your responses. But somehow I am still confused. I wish to know about the Fringe tax benefit. Is this tax still applicable.
If yes, then what I think is that keeping the special allowance will help me put a lesser tax burden on my employee. As I understand the FBT is to be paid by the employer, but I can always make it a part of the employee's CTC. This way the employee, in broad terms, is paying FTB instead of income tax. So he is saving a lot of money.
Can you elaborate on this? I have read so many approaches to break up the salary. Some keep the basic salary as 50% of CTC, some 40%, and some 30%. What is the fundamental behind all this? I know EXACTLY what I want. I want my employee to pay a minimum on taxes so that he can take home the maximum. In a nutshell, I want the actual payout close to the CTC.
I will appreciate it if anyone can explain this to me. Thanks in anticipation.
Some info: My company is in Noida. I don't know if it comes under metro or not. And if there are any state taxes too.
Vishal
From United States, Saint Louis
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Hi Roshni,
The salary breakup given in the attachment by Ekta is not correct. There are some components mentioned that do not match, such as HRA. It should be 40% of Basic or 50% of Basic in the case of A1 Cities. Additionally, some components should be included for their tax benefits. I suggest you kindly go through the income tax act and then frame a breakup of the salary. The salary must be structured in a way that benefits both the employer and employees in all aspects. I will provide you with more information about it later as I am currently busy.
Regards,
Yash
From India, Delhi
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The salary breakup given in the attachment by Ekta is not correct. There are some components mentioned that do not match, such as HRA. It should be 40% of Basic or 50% of Basic in the case of A1 Cities. Additionally, some components should be included for their tax benefits. I suggest you kindly go through the income tax act and then frame a breakup of the salary. The salary must be structured in a way that benefits both the employer and employees in all aspects. I will provide you with more information about it later as I am currently busy.
Regards,
Yash
From India, Delhi
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Dear Mr. Vishal,
There is no FBT now. There are no big tax concessions, be it Metro or non-metro. Do not worry too much about tax saving for the employee. He must plan his tax, not you.
Salary Structure must take into consideration the following:
1. His/Her skill and experience level and market conditions.
2. Motivate him to perform.
3. Certain elements to ensure that he stays with you.
4. Social responsibility like PF, medical, etc.
Basic Pay:
30 to 35% of CTC might be assigned to Basic. 50% is okay at lower salary levels, but at higher levels, keeping it at 30 to 35% will help an organization maintain parity.
Monthly Allowances:
30% of CTC could be assigned towards. Some organizations give this as Flexi allowance. The amount is constant but gives flexibility for an employee to assign the amount as per his tax-saving plans. If you want to plan and give, then you can give under HRA, Education Allowance, Conveyance.
Annual Allowances:
5% of CTC could be under this head. This will include LTA (tax exemption), Medical (Tax exemption), Attire allowance (Tax exemption).
This also helps you to defer your expenses to the next year and also help you to release after the employee stays with you for a year. This may not be applicable in the case of medical, but certainly in attire and LTA, you can release the payment only if the employee stays with you for a year.
Performance Pay:
At the CTC level indicated by you, plan for 15 to 20% towards performance pay.
Social Security:
This will be closer to 10% of CTC. In this case, PF act is not applicable. However, I recommend the inclusion of all employees under PF. This helps in Tax reduction and also future saving. Medical insurance for hospitalization needs to be planned, and the premium you pay towards medical insurance is exempted from tax.
With my experience, I estimate approximately 10 to 15% of CTC will be taxable subject to the employee's savings. Housing loan, HRA, and certain annual benefits, and it is everyone's responsibility to pay to that extent as a citizen.
Thanks,
Sivasankaran
From India, Chennai
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There is no FBT now. There are no big tax concessions, be it Metro or non-metro. Do not worry too much about tax saving for the employee. He must plan his tax, not you.
Salary Structure must take into consideration the following:
1. His/Her skill and experience level and market conditions.
2. Motivate him to perform.
3. Certain elements to ensure that he stays with you.
4. Social responsibility like PF, medical, etc.
Basic Pay:
30 to 35% of CTC might be assigned to Basic. 50% is okay at lower salary levels, but at higher levels, keeping it at 30 to 35% will help an organization maintain parity.
Monthly Allowances:
30% of CTC could be assigned towards. Some organizations give this as Flexi allowance. The amount is constant but gives flexibility for an employee to assign the amount as per his tax-saving plans. If you want to plan and give, then you can give under HRA, Education Allowance, Conveyance.
Annual Allowances:
5% of CTC could be under this head. This will include LTA (tax exemption), Medical (Tax exemption), Attire allowance (Tax exemption).
This also helps you to defer your expenses to the next year and also help you to release after the employee stays with you for a year. This may not be applicable in the case of medical, but certainly in attire and LTA, you can release the payment only if the employee stays with you for a year.
Performance Pay:
At the CTC level indicated by you, plan for 15 to 20% towards performance pay.
Social Security:
This will be closer to 10% of CTC. In this case, PF act is not applicable. However, I recommend the inclusion of all employees under PF. This helps in Tax reduction and also future saving. Medical insurance for hospitalization needs to be planned, and the premium you pay towards medical insurance is exempted from tax.
With my experience, I estimate approximately 10 to 15% of CTC will be taxable subject to the employee's savings. Housing loan, HRA, and certain annual benefits, and it is everyone's responsibility to pay to that extent as a citizen.
Thanks,
Sivasankaran
From India, Chennai
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