Hi Deepa,
Deductions are normally not shown on CTC letter. Instead they are shown on salary slips.
I have attached a sample CTC and a salary slip letter. You can read through it.
Let me know if you need more information.
Regards,
Anil
From India, Delhi
6Deductions are normally not shown on CTC letter. Instead they are shown on salary slips.
I have attached a sample CTC and a salary slip letter. You can read through it.
Let me know if you need more information.
Regards,
Anil
From India, Delhi
Hi Deepa
Before making any deductions let it be statutory or other deductions is gross salary, net salary is payable after all deductions. CTC means cost to company which includes all employer contributions towards esi, pf, bonus gratuity, ltc, medical reimbursement etc
From India, Coimbatore
Before making any deductions let it be statutory or other deductions is gross salary, net salary is payable after all deductions. CTC means cost to company which includes all employer contributions towards esi, pf, bonus gratuity, ltc, medical reimbursement etc
From India, Coimbatore
Kindly go through the below for a comprehensive description
Major Salary Components
Money that is received under Employer-Employee relationship is called Salary . If one is freelancer or are hired by an organization on contract basis, their income would not be treated as salary income.( In such case your income would be treated as income from business and profession)
The salary consists of following parts
Basic Salary: As the name suggests, this forms the very basis of salary. This is the core of salary, and many other components may be calculated based on this amount. It usually depends on one’s grade within the company’s salary structure.It is a fixed part of one’s compensation structure. And the complete amount becomes a part of your in-hand salary.
Allowances: Apart from basic salary, there are some allowances your CTC will contain. Examples include HRA, conveyance allowance, leave travel allowance. Some of these allowances are tax free up to a certain limit and some of them are dependant on your actual spending. It is the amount received by an individual paid by his/her employer in addition to basic salary to meet some service requirements such as Dearness Allowance(DA), House Rent Allowance (HRA), Leave Travel Assistance(LTA) , Lunch Allowance, Conveyance Allowance , Children’s Education Allowance, City compensatory Allowance etc. Allowance can be fully taxable, partly or non taxable.
Claims or Perquisite: A part of your salary may also be made up of your billed claims. These include components like mobile allowance, medical allowance etc. There is a maximum limit set to these components and are paid when you submit your bills. These are usually tax free. It is any benefit or amenity granted or provided free of cost or at concessional rate such as Rent free unfurnished house, Rent free furnished house, Motor car facility, Reimbursement of Gas, Electricity & Water, Club facility, Domestic Servant Facility, Interest Subsidy on Loan , Reimbursement of medical bills, Reimbursement of Hospital bills, Reimbursement of telephone bills, Benefits derived by employee stock option, and so on.
How are perquisites taxed? Since these are non-cash components, they cannot be taxed directly. So the income tax laws attach a certain value to each of these components and charges a tax on them. The calculation of this value varies from category to category. Nevertheless, the thumb rule across all categories is that only those benefits that you use for personal purpose will be considered as perquisites.
Deductions: A major part of your CTC comprises compulsory deductibles. These include deductions for provident fund, medical insurance etc. They form a part of your compensation structure but you do not get them as part of your in-hand salary. As such, although it increases your CTC, it does not increment your net salary. Compulsory deduction such as Provident Fund, Income tax,Professional Tax (where applicable) . Optional deduction such as recovery for advance or loan if taken, voluntary contribution to P.F etc
Provident Fund Contribution: Provident fund contribution has two sides – the employer’s contribution and employee’s contribution. This is usually 12 per cent of the basic salary. However, this contribution is not paid out . It is directly deposited in Provident Fund(PF) account and paid to employee when he retires or resigns.There is also employee’s contribution to PF. This amount is deducted from his monthly salary and deposited in his PF account. For details on provident fund you can read Provident Fund (PF) and Voluntary Provident Fund (VPF)
Performance linked pay: Linking a part of the salary to productivity and performance has become a trend today. You get the complete amount only on 100% achievement of target, but it forms a part of your CTC, fattening it up.
Different types of salary:
Gross Salary: is the amount of salary paid after adding all benefits and allowances and before deducting any tax.
Net Salary: is what is left of your salary after deductions have been made.
Take Home Salary: Is usually the Net Salary unless there are some personal deductions like loan or bond re-payments.
Cost to Company: Companies use the term “Cost to Company” to calculate the total cost to to employ . i.e. all the costs associated with an employment contract. Major part of CTC comprises of compulsory deductibles. These include deductions for provident fund, medical insurance etc. They form a part of your compensation structure but you not get them as a part of in-hand salary. As such, although it increases your CTC, it does not increment your net salary.
Taxes: Taxes are an unavoidable evil and they eat up a large chunk of your salary. Taxes are obviously never mentioned in your offer letter. So, ensure that you calculate your tax liabilities with the new income in accordance with tax policies to figure out the amount you will receive in your pay cheque.
The Salary structure varies company to company based on their policies. Some of the common Pay heads used are
1) Basic – 35% – 50% of Gross
2) HRA – 40% of Basic for Non metro & 50% of basic for Metro(Delhi, Mumbai, Chennai or Kolkata)
3) Con – Max Rs. 800/ P M which is Max of Rs. 9600 P A
4) Medical Reim – Max Rs. 1250 / PM which can be max of Rs 15000 PA
5) Spl Allow – Balance of Gross will be provided as Spl Allow
Statutory
1) PF
Emp Contribution – 12% on Basic (can be subjective to 780, which is 12% of the min basic salary i.e. 6500)
Emp’r Contribution - ( EPS – 8.33% (subject to a ceiling of Rs. 541)
PF – Rest of the amount out of 12% (can be subjective to 780, which is 12% of the min basic salary i.e. 6500)
PF administration charges – 1.1%
EDLI – 0.5% (subject to a ceiling salary of Rs. 6500)
EDLI administration charges 0.01% “
2) ESI – Applicable to employees whose Gross Salary is less than or equal to Rs.15000
Emp Contribution – 1.75% on Grorss
Emp’r Contribution – 4.75% on Gross
PT – It Varies State to state
Gratuity = Basic/26*15*(no. of years- It is payable to the employee who completes 5yrs of service in the organisation. It can be showed as a part of CTC.)
OT Calculation = basic+da/26/8*no.of hrs * 2
If Employees coming under high Salary Then you can again split up the amount in Spl Allow As
1) Food coupons
2) Car Hire
3) Petrol and Maint for Car
4) LTA
FBT is applicable Apart from LTA.
From India, Mumbai
Major Salary Components
Money that is received under Employer-Employee relationship is called Salary . If one is freelancer or are hired by an organization on contract basis, their income would not be treated as salary income.( In such case your income would be treated as income from business and profession)
The salary consists of following parts
Basic Salary: As the name suggests, this forms the very basis of salary. This is the core of salary, and many other components may be calculated based on this amount. It usually depends on one’s grade within the company’s salary structure.It is a fixed part of one’s compensation structure. And the complete amount becomes a part of your in-hand salary.
Allowances: Apart from basic salary, there are some allowances your CTC will contain. Examples include HRA, conveyance allowance, leave travel allowance. Some of these allowances are tax free up to a certain limit and some of them are dependant on your actual spending. It is the amount received by an individual paid by his/her employer in addition to basic salary to meet some service requirements such as Dearness Allowance(DA), House Rent Allowance (HRA), Leave Travel Assistance(LTA) , Lunch Allowance, Conveyance Allowance , Children’s Education Allowance, City compensatory Allowance etc. Allowance can be fully taxable, partly or non taxable.
Claims or Perquisite: A part of your salary may also be made up of your billed claims. These include components like mobile allowance, medical allowance etc. There is a maximum limit set to these components and are paid when you submit your bills. These are usually tax free. It is any benefit or amenity granted or provided free of cost or at concessional rate such as Rent free unfurnished house, Rent free furnished house, Motor car facility, Reimbursement of Gas, Electricity & Water, Club facility, Domestic Servant Facility, Interest Subsidy on Loan , Reimbursement of medical bills, Reimbursement of Hospital bills, Reimbursement of telephone bills, Benefits derived by employee stock option, and so on.
How are perquisites taxed? Since these are non-cash components, they cannot be taxed directly. So the income tax laws attach a certain value to each of these components and charges a tax on them. The calculation of this value varies from category to category. Nevertheless, the thumb rule across all categories is that only those benefits that you use for personal purpose will be considered as perquisites.
Deductions: A major part of your CTC comprises compulsory deductibles. These include deductions for provident fund, medical insurance etc. They form a part of your compensation structure but you do not get them as part of your in-hand salary. As such, although it increases your CTC, it does not increment your net salary. Compulsory deduction such as Provident Fund, Income tax,Professional Tax (where applicable) . Optional deduction such as recovery for advance or loan if taken, voluntary contribution to P.F etc
Provident Fund Contribution: Provident fund contribution has two sides – the employer’s contribution and employee’s contribution. This is usually 12 per cent of the basic salary. However, this contribution is not paid out . It is directly deposited in Provident Fund(PF) account and paid to employee when he retires or resigns.There is also employee’s contribution to PF. This amount is deducted from his monthly salary and deposited in his PF account. For details on provident fund you can read Provident Fund (PF) and Voluntary Provident Fund (VPF)
Performance linked pay: Linking a part of the salary to productivity and performance has become a trend today. You get the complete amount only on 100% achievement of target, but it forms a part of your CTC, fattening it up.
Different types of salary:
Gross Salary: is the amount of salary paid after adding all benefits and allowances and before deducting any tax.
Net Salary: is what is left of your salary after deductions have been made.
Take Home Salary: Is usually the Net Salary unless there are some personal deductions like loan or bond re-payments.
Cost to Company: Companies use the term “Cost to Company” to calculate the total cost to to employ . i.e. all the costs associated with an employment contract. Major part of CTC comprises of compulsory deductibles. These include deductions for provident fund, medical insurance etc. They form a part of your compensation structure but you not get them as a part of in-hand salary. As such, although it increases your CTC, it does not increment your net salary.
Taxes: Taxes are an unavoidable evil and they eat up a large chunk of your salary. Taxes are obviously never mentioned in your offer letter. So, ensure that you calculate your tax liabilities with the new income in accordance with tax policies to figure out the amount you will receive in your pay cheque.
The Salary structure varies company to company based on their policies. Some of the common Pay heads used are
1) Basic – 35% – 50% of Gross
2) HRA – 40% of Basic for Non metro & 50% of basic for Metro(Delhi, Mumbai, Chennai or Kolkata)
3) Con – Max Rs. 800/ P M which is Max of Rs. 9600 P A
4) Medical Reim – Max Rs. 1250 / PM which can be max of Rs 15000 PA
5) Spl Allow – Balance of Gross will be provided as Spl Allow
Statutory
1) PF
Emp Contribution – 12% on Basic (can be subjective to 780, which is 12% of the min basic salary i.e. 6500)
Emp’r Contribution - ( EPS – 8.33% (subject to a ceiling of Rs. 541)
PF – Rest of the amount out of 12% (can be subjective to 780, which is 12% of the min basic salary i.e. 6500)
PF administration charges – 1.1%
EDLI – 0.5% (subject to a ceiling salary of Rs. 6500)
EDLI administration charges 0.01% “
2) ESI – Applicable to employees whose Gross Salary is less than or equal to Rs.15000
Emp Contribution – 1.75% on Grorss
Emp’r Contribution – 4.75% on Gross
PT – It Varies State to state
Gratuity = Basic/26*15*(no. of years- It is payable to the employee who completes 5yrs of service in the organisation. It can be showed as a part of CTC.)
OT Calculation = basic+da/26/8*no.of hrs * 2
If Employees coming under high Salary Then you can again split up the amount in Spl Allow As
1) Food coupons
2) Car Hire
3) Petrol and Maint for Car
4) LTA
FBT is applicable Apart from LTA.
From India, Mumbai
What is gross salary and what is net salary is clear. Cost to company (CTC) details that employer has to bear. It shown as if they are paying more, but originally it is not so. For example Gratuity is only after completion of 5 years, but shown from the entry of the employee. This is all to show that they are paying hefty. Poor worker is ultimate sufferer.
From India, Nellore
From India, Nellore
Hai Deepa Shree
CTC means Cost To Company - The cost which was offered by the Employer i.e. Basic, DA, HRA, Bonus, PF, Gratuity and any allowances paid by the employer
Gross Salary includes as Basic, DA, HR, Allowances
Gross Salary : For Ex: 5000+2500+2000+3000 = 12500
Net Salary : Gross Salary - (minus) Deductions
Deductions like PF, ESI, Advances, Tax etc. = 500+100+500+1200 = 2300
Gross Salary :12500 - Deductions : 2300 = Net Salary : 10200
I think it is OK.
Regards
Mano Kavin
From India, Coimbatore
CTC means Cost To Company - The cost which was offered by the Employer i.e. Basic, DA, HRA, Bonus, PF, Gratuity and any allowances paid by the employer
Gross Salary includes as Basic, DA, HR, Allowances
Gross Salary : For Ex: 5000+2500+2000+3000 = 12500
Net Salary : Gross Salary - (minus) Deductions
Deductions like PF, ESI, Advances, Tax etc. = 500+100+500+1200 = 2300
Gross Salary :12500 - Deductions : 2300 = Net Salary : 10200
I think it is OK.
Regards
Mano Kavin
From India, Coimbatore
GROSS SALARY – Gross Salary is the total salary that a company actually pays to an employee, before any deductions.
It is the total of all earnings, benefits, and allowances, before any deductions for government taxes (such as Income Tax and Profession Tax), social security schemes (such as Provident Fund), and health insurance.
e.g. the company might have taken a health insurance for you by paying a premium of Rs. 50,000 per year to an insurance company and therefore, Rs. 50,000 is included in CTC (because it goes out from the company for you,) but is not included in Gross Salary (because it doesn’t come to you).
Gross salary is always lesser that CTC and more than take-home salary because CTC includes all money that the company spends on you (even if it doesn’t pay you) whereas Gross salary is only the money that company pays to you.
NET SALARY – Take Home Pay or Net Pay, is the final salary that you get in your bank account (or through cheque or cash).
In other words, it is the final amount that is left after all applicable deductions for income tax, provident fund, employee state insurance, professional tax, health insurance, etc., are made from your gross salary by the employer.
The take-home salary is always lesser than CTC and Gross salary and in extreme cases, it might even be as low as 30-50% of CTC.
Read about all such terms on http://paybooks.in/blog/payroll-terms-in-india/
From India, Bangalore
It is the total of all earnings, benefits, and allowances, before any deductions for government taxes (such as Income Tax and Profession Tax), social security schemes (such as Provident Fund), and health insurance.
e.g. the company might have taken a health insurance for you by paying a premium of Rs. 50,000 per year to an insurance company and therefore, Rs. 50,000 is included in CTC (because it goes out from the company for you,) but is not included in Gross Salary (because it doesn’t come to you).
Gross salary is always lesser that CTC and more than take-home salary because CTC includes all money that the company spends on you (even if it doesn’t pay you) whereas Gross salary is only the money that company pays to you.
NET SALARY – Take Home Pay or Net Pay, is the final salary that you get in your bank account (or through cheque or cash).
In other words, it is the final amount that is left after all applicable deductions for income tax, provident fund, employee state insurance, professional tax, health insurance, etc., are made from your gross salary by the employer.
The take-home salary is always lesser than CTC and Gross salary and in extreme cases, it might even be as low as 30-50% of CTC.
Read about all such terms on http://paybooks.in/blog/payroll-terms-in-india/
From India, Bangalore
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Gross Salary(1).xls