Our company has only a couple of people who earn a basic salary below 21,000 per month. Our auditor said that we can pay even the junior employees a basic salary exceeding 21,000 and adjust the rest of the amount as a special allowance or House Rent Allowance (HRA). Can this be implemented? One employee's monthly salary is 21,600. Can I pay the entire amount as basic salary to him?
From India
Acknowledge(0)
Amend(0)
1From India
Acknowledge(0)Amend(0)
Hello there,
The basic should be in the limit of 30-60% of the gross salary. Most companies typically opt for an average of 40-50% of the gross as basic; the remaining percentage, as you mentioned, can be allocated to HRA or other components. It's essential to remember that whatever amount you allocate to the basic salary is taxable. If you allocate the entire amount to basic, the employee will not be eligible for tax-free benefits.
The best advice is to allocate 40% to basic salary and distribute the rest among different components based on the tax slab.
Thank you.
From India, Hyderabad
Acknowledge(0)Amend(0)
The basic should be in the limit of 30-60% of the gross salary. Most companies typically opt for an average of 40-50% of the gross as basic; the remaining percentage, as you mentioned, can be allocated to HRA or other components. It's essential to remember that whatever amount you allocate to the basic salary is taxable. If you allocate the entire amount to basic, the employee will not be eligible for tax-free benefits.
The best advice is to allocate 40% to basic salary and distribute the rest among different components based on the tax slab.
Thank you.
From India, Hyderabad
Acknowledge(0)Amend(0)
Hi,
Please ensure that the breakdown of salaries is done considering key areas such as Basic Salary, HRA, Conveyance, and the remaining amount as Special Allowances. The basic salary should typically account for around 40-50% of the total salary, while HRA should be set at 50% of the basic salary, with the remainder allocated as Special Allowances after deducting the Conveyance allowance based on the work location. The Basic salary is significant, particularly when calculating Gratuity and/or PF.
The auditor may have suggested that the basic salary could exceed 21k, but I believe they did not advise you to designate the entire salary as basic.
Thanks and Regards
From India, Hyderabad
Acknowledge(0)Amend(0)
Please ensure that the breakdown of salaries is done considering key areas such as Basic Salary, HRA, Conveyance, and the remaining amount as Special Allowances. The basic salary should typically account for around 40-50% of the total salary, while HRA should be set at 50% of the basic salary, with the remainder allocated as Special Allowances after deducting the Conveyance allowance based on the work location. The Basic salary is significant, particularly when calculating Gratuity and/or PF.
The auditor may have suggested that the basic salary could exceed 21k, but I believe they did not advise you to designate the entire salary as basic.
Thanks and Regards
From India, Hyderabad
Acknowledge(0)Amend(0)
Sir,
Usually, the concerned state government under the Labour Department will issue details regarding BP and VDA, among other things. I recommend verifying this information on Google to ensure accuracy, especially in regard to state MW rates. You can download the relevant documents from the official sources.
Another important point to note is that, to the best of my knowledge, the total worker's entire salary is undoubtedly subject to income tax applicability, not just the basic pay. Please consider this aspect while analyzing the salary structure and tax implications.
Thank you.
From India, Nellore
Acknowledge(0)Amend(0)
Usually, the concerned state government under the Labour Department will issue details regarding BP and VDA, among other things. I recommend verifying this information on Google to ensure accuracy, especially in regard to state MW rates. You can download the relevant documents from the official sources.
Another important point to note is that, to the best of my knowledge, the total worker's entire salary is undoubtedly subject to income tax applicability, not just the basic pay. Please consider this aspect while analyzing the salary structure and tax implications.
Thank you.
From India, Nellore
Acknowledge(0)Amend(0)Looking for something specific? - Join & Be Part Of Our Community and get connected with the right people who can help. Our AI-powered platform provides real-time fact-checking, peer-reviewed insights, and a vast historical knowledge base to support your search.