Hi Indu,
I am not sure if you have been asked to prepare a standard template that fits all the positions in your organization. I am not sure if such a template is possible. Depending upon the case, you can play a lot with the fringe benefits. Fringe benefits remain taxable but not to the extent as salary components.
I can only suggest to you the right approach to follow. I will have to do some homework to suggest the necessary components, but for now, I can definitely help you with the philosophy that you should follow to arrive at a pay structure. DEVISE THE STRUCTURE IN A MANNER SUCH THAT THE TAX LIABILITY ON THE EMPLOYEES IS MINIMIZED.
You can now implement the concept of a basket of allowance to give flexibility to the employees. It is generally called "special allowance," and employees are free to play with the basket components depending on their requirements and also how much they would want to take home.
Hope this is some help.
Regards, Pseudonym-Gopikishan :-)
From India, Mumbai
3I am not sure if you have been asked to prepare a standard template that fits all the positions in your organization. I am not sure if such a template is possible. Depending upon the case, you can play a lot with the fringe benefits. Fringe benefits remain taxable but not to the extent as salary components.
I can only suggest to you the right approach to follow. I will have to do some homework to suggest the necessary components, but for now, I can definitely help you with the philosophy that you should follow to arrive at a pay structure. DEVISE THE STRUCTURE IN A MANNER SUCH THAT THE TAX LIABILITY ON THE EMPLOYEES IS MINIMIZED.
You can now implement the concept of a basket of allowance to give flexibility to the employees. It is generally called "special allowance," and employees are free to play with the basket components depending on their requirements and also how much they would want to take home.
Hope this is some help.
Regards, Pseudonym-Gopikishan :-)
From India, Mumbai
To assist employees in maximizing their tax benefits on higher rent, consider increasing the House Rent Allowance (HRA) to up to 40% of their basic salary, which is deductible from their income.
The fixed medical amount is taxable for employees. Therefore, it may be more beneficial to structure it as a reimbursement. The maximum allowable reimbursement amount is $15,000 per year.
Additionally, empower employees to make decisions regarding variable pays. Offer them the option to claim a Leave Travel Allowance, which can typically be availed once every two years.
The fixed medical amount is taxable for employees. Therefore, it may be more beneficial to structure it as a reimbursement. The maximum allowable reimbursement amount is $15,000 per year.
Additionally, empower employees to make decisions regarding variable pays. Offer them the option to claim a Leave Travel Allowance, which can typically be availed once every two years.
Dear Indrani,
The attached file will help you more in the preparation of the Salary Structure. Regarding Medical Allowance, Pawan is correct. If you hold the amount and pay monthly, quarterly, half-yearly, or yearly, it requires bills and is taxable. If you are paying along with the salary, up to 1000/- is not taxable.
Ajay Sharma
09460131855
ajaysheel@gmail.com
From India, Jaipur
The attached file will help you more in the preparation of the Salary Structure. Regarding Medical Allowance, Pawan is correct. If you hold the amount and pay monthly, quarterly, half-yearly, or yearly, it requires bills and is taxable. If you are paying along with the salary, up to 1000/- is not taxable.
Ajay Sharma
09460131855
ajaysheel@gmail.com
From India, Jaipur
Dear Mr. Chandnisnh,
Thank you so much for your valuable inputs. I have incorporated the other components in the salary structure except for loan repayment, prepaid/advance, and leave encashment. We are yet to implement PF and ESI in our organization. We usually don't extend loans to our employees, and leave encashment is a good suggestion that I will discuss with management.
Thank you for your inputs. Keep posting.
Thanks and Regards,
Indrani Chakraborty
From India, Pune
Thank you so much for your valuable inputs. I have incorporated the other components in the salary structure except for loan repayment, prepaid/advance, and leave encashment. We are yet to implement PF and ESI in our organization. We usually don't extend loans to our employees, and leave encashment is a good suggestion that I will discuss with management.
Thank you for your inputs. Keep posting.
Thanks and Regards,
Indrani Chakraborty
From India, Pune
Hi Indu,
I saw the structure which was posted to you, there is some correction. I hope you are aware of CTC "COST TO COMPANY." So, all costs will be included in CTC which are incurred by the employee as follows:
BASIC
DA
HRA
CONVEYANCE
SPL. ALLW.
SUPL. ALLW.
FOOD ALLW.
GROSS ------------
PF 12% EMPLOYER
ESI 4.75% EMPLOYER (IF APPLICABLE)
P.TAX (IF APPLICABLE)
BONUS (AS PER COMPANY POLICY)
GRATUITY
SUPERANNUATION
THAT IS CTC
Please see that Basic + DA wages should equal the minimum wages, we can't bifurcate minimum wages. (As it's ordered by the Supreme Court.)
Regards,
Jitender
From India, New Delhi
I saw the structure which was posted to you, there is some correction. I hope you are aware of CTC "COST TO COMPANY." So, all costs will be included in CTC which are incurred by the employee as follows:
BASIC
DA
HRA
CONVEYANCE
SPL. ALLW.
SUPL. ALLW.
FOOD ALLW.
GROSS ------------
PF 12% EMPLOYER
ESI 4.75% EMPLOYER (IF APPLICABLE)
P.TAX (IF APPLICABLE)
BONUS (AS PER COMPANY POLICY)
GRATUITY
SUPERANNUATION
THAT IS CTC
Please see that Basic + DA wages should equal the minimum wages, we can't bifurcate minimum wages. (As it's ordered by the Supreme Court.)
Regards,
Jitender
From India, New Delhi
Dear Mr Gopikishan Thank you for your feedback.I will definitely take care so that the salary structure is employee friendly. Keep posting Thanks and Regards Indrani Chakraborty
From India, Pune
From India, Pune
Dear Mr. Ajay Sheel,
Thank you very much for the attached salary structure. A member of this community has pointed out that the city allowance is different for different cities. Can you please let me know the figures for Pune?
Thanking you in anticipation,
Indrani Chakraborty
From India, Pune
Thank you very much for the attached salary structure. A member of this community has pointed out that the city allowance is different for different cities. Can you please let me know the figures for Pune?
Thanking you in anticipation,
Indrani Chakraborty
From India, Pune
Hi Indrawn,
I want to add some notes.
1. Medical allowance is different from reimbursement. If your company is reimbursing the bills, the company has to pay the Fringe benefit tax on it. However, if it is an allowance, then up to a maximum of 15K is allowed for the employee, and it is tax-free. For the allowance, you have to collect the bills and produce them to the Auditor for the preparation of Form 16 at the end of the financial year.
2. Your salary structure -
Basic Salary - 40% of gross Salary - OK
HRA - 30% of basic - OK
City allowance - 10% - OK
Conveyance allowance - 10% - incorrect (Pune is considered a non-metro area, so the conveyance is fixed at 800 per month with no changes.)
Sundry medical expenses 1000 (fixed amount) - OK, as this will vary from company to company, but for taxation, a maximum of 15K is allowed per year.
Mobile allowance 500 - falls under Fringe benefit tax for the company, and for the allowance to be tax-free, he/she has to produce the bill.
Other allowances xxxx Residual amount - OK
I hope this will keep you happy. If you need anything extra, email me at
.
Cheers,
Suneel.
From India, Bangalore
I want to add some notes.
1. Medical allowance is different from reimbursement. If your company is reimbursing the bills, the company has to pay the Fringe benefit tax on it. However, if it is an allowance, then up to a maximum of 15K is allowed for the employee, and it is tax-free. For the allowance, you have to collect the bills and produce them to the Auditor for the preparation of Form 16 at the end of the financial year.
2. Your salary structure -
Basic Salary - 40% of gross Salary - OK
HRA - 30% of basic - OK
City allowance - 10% - OK
Conveyance allowance - 10% - incorrect (Pune is considered a non-metro area, so the conveyance is fixed at 800 per month with no changes.)
Sundry medical expenses 1000 (fixed amount) - OK, as this will vary from company to company, but for taxation, a maximum of 15K is allowed per year.
Mobile allowance 500 - falls under Fringe benefit tax for the company, and for the allowance to be tax-free, he/she has to produce the bill.
Other allowances xxxx Residual amount - OK
I hope this will keep you happy. If you need anything extra, email me at
Cheers,
Suneel.
From India, Bangalore
Dear Mr. Jitender,
Thank you very much for the help extended. I will mention the professional tax in the CTC; the rest of the things are not applicable to our company. I will also keep in mind your suggestion about the bifurcation of salary.
Thank you. Keep posting.
Regards,
Indrani Chakraborty
From India, Pune
Thank you very much for the help extended. I will mention the professional tax in the CTC; the rest of the things are not applicable to our company. I will also keep in mind your suggestion about the bifurcation of salary.
Thank you. Keep posting.
Regards,
Indrani Chakraborty
From India, Pune
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Salary Structure.xls