wht r ideal salary components in a salary package ,taking into consideration FBT implications on each salary component.
what salary components should be beneficial to both , employee from tax side and for employer from FBT implications?
From India
1what salary components should be beneficial to both , employee from tax side and for employer from FBT implications?
From India
Hi Sara,
Depends on the philosophy & design of the company on the structural components on salary for the staff..
Post FBT has been a blow for companies which used to give employees cash salary as part of the salary to evade taxes..FBT has not entirely corrected the situation as yet ..has done more damage than rectifying the same..
Structure suggested:-
Monthly:-
Basic 50 % of the CTC
HRA 50% of Basic in 4 metro towns otherwise 40%
Conveyance allowance :- Rs 800/ m
Annuals
Medical Allowance - Rs 15k p.a
LTA one months basic
Sodexho Meal coupons - Rs 18 k p.a.
PF
Total of the above :- CTC
Besides this what you can do is to give selected employees in higher tax bracket ,benefits like transport reimbursement /allowance on which the company would have to bear the FBT of 1.64% which can be a part of salary structure to ensure higher take home..
Cheers,
Rajat
From India, Pune
Depends on the philosophy & design of the company on the structural components on salary for the staff..
Post FBT has been a blow for companies which used to give employees cash salary as part of the salary to evade taxes..FBT has not entirely corrected the situation as yet ..has done more damage than rectifying the same..
Structure suggested:-
Monthly:-
Basic 50 % of the CTC
HRA 50% of Basic in 4 metro towns otherwise 40%
Conveyance allowance :- Rs 800/ m
Annuals
Medical Allowance - Rs 15k p.a
LTA one months basic
Sodexho Meal coupons - Rs 18 k p.a.
PF
Total of the above :- CTC
Besides this what you can do is to give selected employees in higher tax bracket ,benefits like transport reimbursement /allowance on which the company would have to bear the FBT of 1.64% which can be a part of salary structure to ensure higher take home..
Cheers,
Rajat
From India, Pune
Hi Rajat,
thanks for the reply, but pls can u help me with follng areas.
If we have only basic, HRA, conveyance, wont the basic salary will be very high, it affects on total CTC .
secondly is it possible to include medical and LTA as monthly salary to increase net take home salary ,and for tax benefits an employee reimburses it at the end of year for LTA (as per IT rules)and quartely for medical,can we reimburse medical also on annual basis,
how do we treat Sodexho coupons in salary components
only lunch allowance in terms of monthly salary is not exempted from FBT?
pls advise as i have to revise salary components for the Company
thanks
From India
thanks for the reply, but pls can u help me with follng areas.
If we have only basic, HRA, conveyance, wont the basic salary will be very high, it affects on total CTC .
secondly is it possible to include medical and LTA as monthly salary to increase net take home salary ,and for tax benefits an employee reimburses it at the end of year for LTA (as per IT rules)and quartely for medical,can we reimburse medical also on annual basis,
how do we treat Sodexho coupons in salary components
only lunch allowance in terms of monthly salary is not exempted from FBT?
pls advise as i have to revise salary components for the Company
thanks
From India
HI Sara,
Welcome... :D
Yes ...
Don't do that!..since they are reimbursements so they are out of tax limits..as long as you don't exceed the limits permissable by IT Act..
What you can do is show them as annuals reimbursed subject to production of bills..it can be given on monthly basis as well..
Sodexho coupons are shown as part of the salary annexure and coupons is provided to the employees every month..Sodexho/Accor are exempted from the purview of FBT..
Hope this helps you..if you have further doubts do let me know..
Cheers,
Rajat
From India, Pune
Welcome... :D
Yes ...
Don't do that!..since they are reimbursements so they are out of tax limits..as long as you don't exceed the limits permissable by IT Act..
What you can do is show them as annuals reimbursed subject to production of bills..it can be given on monthly basis as well..
Sodexho coupons are shown as part of the salary annexure and coupons is provided to the employees every month..Sodexho/Accor are exempted from the purview of FBT..
Hope this helps you..if you have further doubts do let me know..
Cheers,
Rajat
From India, Pune
Hi rajat,
Thanks for helping me over and all again.
our main aim in restucturing the salary components was to lower down basic and FBT implications .
we have decided the follng salary structure
basic
hra
conveyance(upto 800 pm)
Edu Allo( tax exempted Rs 200 per child)
Spec Allo
Med Allowance(upto1250 pm)
LTA Allowance (one month gross salary p a)
monthly ssalary
PF contribution
annual CTC
I am aware FBT is applicable to edu All, Spe All,med and LTA?
can u pls guide me on FBT %age for each above mentioned salary component ?and what should be the course of action
pls advise.
thanx,
sara
From India
Thanks for helping me over and all again.
our main aim in restucturing the salary components was to lower down basic and FBT implications .
we have decided the follng salary structure
basic
hra
conveyance(upto 800 pm)
Edu Allo( tax exempted Rs 200 per child)
Spec Allo
Med Allowance(upto1250 pm)
LTA Allowance (one month gross salary p a)
monthly ssalary
PF contribution
annual CTC
I am aware FBT is applicable to edu All, Spe All,med and LTA?
can u pls guide me on FBT %age for each above mentioned salary component ?and what should be the course of action
pls advise.
thanx,
sara
From India
Hi Sara,
The rate applicable is 6.73 % which is paid by the company.
Education allowance( Rs 200 pm.), Special allowance is out of purview of FBT.
LTA does not fall under the ambit of FBT as it is covered under the section of I T Act.
Hope this helps..
Cheers,
Rajat
From India, Pune
The rate applicable is 6.73 % which is paid by the company.
Education allowance( Rs 200 pm.), Special allowance is out of purview of FBT.
LTA does not fall under the ambit of FBT as it is covered under the section of I T Act.
Hope this helps..
Cheers,
Rajat
From India, Pune
hello rajat,
thanx for yr reply,
is FBT charge 6.73 % on all salary components?
no FBT on special allowance?
what is the amount LTA can be paid to employees and what is tax exemption on it?
i understand, maximum LTA for employee should be approx one month basic and exemption will be according to IT clauses of journey conducted and total expenditure incurred by employee.
pls revert on the above,
i am preety new to this forum, but off late i have been reading lot of your articles and from few others as well, and i would like to state its very informative.
this HR community forum is one of its own kind and very beneficial to many HR professionals , where knowledge is shared across and in the process its expanded to great heights.
is there any other HR community forum, where knowledge is shared
across,
all in all , this forum is really good,
and last but not least , thanks rajat for helping me out with HR issues.
sara
From India
thanx for yr reply,
is FBT charge 6.73 % on all salary components?
no FBT on special allowance?
what is the amount LTA can be paid to employees and what is tax exemption on it?
i understand, maximum LTA for employee should be approx one month basic and exemption will be according to IT clauses of journey conducted and total expenditure incurred by employee.
pls revert on the above,
i am preety new to this forum, but off late i have been reading lot of your articles and from few others as well, and i would like to state its very informative.
this HR community forum is one of its own kind and very beneficial to many HR professionals , where knowledge is shared across and in the process its expanded to great heights.
is there any other HR community forum, where knowledge is shared
across,
all in all , this forum is really good,
and last but not least , thanks rajat for helping me out with HR issues.
sara
From India
Hi Sara,
Am extremely sorry for delayed response as i was out of station for a while..hope am not too late..
Am sorry for not giving clarification on FBT ..it would be applicable only on Medical allowance only ..rest of the components as discussed is out of purview of FBT.
No, this comes under Taxable salary computation..afterall one can't punished twice.. :D
Twice in the block of 4 years is exempted and subject to certain clauses..well this has been discussed in detail in this forum..please use the tool search to give information on this..
Thanks.. :D to you and all the members of this forum who have made this a very very special one...
Cheers,
Rajat
From India, Pune
Am extremely sorry for delayed response as i was out of station for a while..hope am not too late..
Am sorry for not giving clarification on FBT ..it would be applicable only on Medical allowance only ..rest of the components as discussed is out of purview of FBT.
No, this comes under Taxable salary computation..afterall one can't punished twice.. :D
Twice in the block of 4 years is exempted and subject to certain clauses..well this has been discussed in detail in this forum..please use the tool search to give information on this..
Thanks.. :D to you and all the members of this forum who have made this a very very special one...
Cheers,
Rajat
From India, Pune
Dear all,
In further to requests from Members for detailed clarification of FBT impact on salary structure; am attaching herewith the document which shows the impact of FBT on a salry of Rs 5 Lacs p.a. with comparison of pre-FBT & post FBT.
Should you have any queries please feel to ask.
Cheers,
Rajat
From India, Pune
In further to requests from Members for detailed clarification of FBT impact on salary structure; am attaching herewith the document which shows the impact of FBT on a salry of Rs 5 Lacs p.a. with comparison of pre-FBT & post FBT.
Should you have any queries please feel to ask.
Cheers,
Rajat
From India, Pune
Thanx Rajat,
this FBT comparison sheet was very informative,
thanks a lot,
as i was exploring for some allowance to be introduced in salary structure for lowering of basic component & also tax savings,
i came to know that ad-hoc allowance can be given forming an maximum portion of salary and is not attracting FBT as well, i beleive it will be taxable in hands of employee then .
do you have any information of how adhoc allowance is treated in monthly salary, or for that matter know any allowance which will bring down the basic amount?
pls guide,
thanks
sara.
From India
this FBT comparison sheet was very informative,
thanks a lot,
as i was exploring for some allowance to be introduced in salary structure for lowering of basic component & also tax savings,
i came to know that ad-hoc allowance can be given forming an maximum portion of salary and is not attracting FBT as well, i beleive it will be taxable in hands of employee then .
do you have any information of how adhoc allowance is treated in monthly salary, or for that matter know any allowance which will bring down the basic amount?
pls guide,
thanks
sara.
From India
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SALARY CAN BE SPLIT INTO COMPONENTS BUT NOT LESS THAN THE MINIMUM WAGES.docx