Conceptually, there are only two mistakes in CTC Calculation attached by you. i) Employees' contribution to PF is deducted from the gross salary payable to the employee; hence, it is being paid from the employee's pocket and not from the employer's pocket and should not be added to the Cost to Company (CTC). ii) Again, P Tax is deducted from the employees' salary, i.e., paid from the employees' pocket; hence, it should not be part of CTC.
It is not mandatory to pay DA in the private sector, and many organizations do not have DA in their salary structure. Some companies do pay DA either as a Fixed DA or by way of applying some formula or percentage.
CTC Calculation should ideally include all costs incurred on the employee's salary and perks. The definition of perks and whether to include them in CTC is always argued and debated. For example, some companies include the cost of free transport and canteen subsidy in CTC, while others don't. Some companies include gratuity in CTC, while some don't, arguing that it is payable only after 5 years of service.
In the case of Bonus, if it is payable, it needs to be added to CTC.
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Hello senior;
Thank you for your reply, and I got an overall idea about CTC. In CTC, we should mention only the employer's contribution toward the employee. In the monthly salary, we should deduct the employees' contribution. In the employer's PF contribution, is the ceiling amount correct, or should we calculate it from the basic? In what percentage should we calculate D.A.?
Thanks and Regards,
Ruban Kumar.R
From India, Pune
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35It is not mandatory to pay DA in the private sector, and many organizations do not have DA in their salary structure. Some companies do pay DA either as a Fixed DA or by way of applying some formula or percentage.
CTC Calculation should ideally include all costs incurred on the employee's salary and perks. The definition of perks and whether to include them in CTC is always argued and debated. For example, some companies include the cost of free transport and canteen subsidy in CTC, while others don't. Some companies include gratuity in CTC, while some don't, arguing that it is payable only after 5 years of service.
In the case of Bonus, if it is payable, it needs to be added to CTC.
---
Hello senior;
Thank you for your reply, and I got an overall idea about CTC. In CTC, we should mention only the employer's contribution toward the employee. In the monthly salary, we should deduct the employees' contribution. In the employer's PF contribution, is the ceiling amount correct, or should we calculate it from the basic? In what percentage should we calculate D.A.?
Thanks and Regards,
Ruban Kumar.R
From India, Pune
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There is a mistake in the calculation of Employee PF, ESI & Professional Tax as they are not included in CTC. These are deductions that are subtracted from the Employee's Gross Salary.
Only the Employer's contributions are calculated in CTC, such as Employer PF, ESI Bonus, Gratuity, and other facilities like Insurance, GSLI, Medical policy, etc.
From India, Pune
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Only the Employer's contributions are calculated in CTC, such as Employer PF, ESI Bonus, Gratuity, and other facilities like Insurance, GSLI, Medical policy, etc.
From India, Pune
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Cost to company includes:
1. Salary: Basic + DA + HRA + CCA
2. Other Allowances: Books & periodicals + servant allowance + any other allowances
3. Statutory payments: Provident Fund + Bonus + Gratuity
Exclusions:
1. Employee PF Contribution
2. ESI Contribution
3. Profession Tax
The calculation would be as follows:
CTC
Per month: $25,000
Yearly: $300,000
Basic: $7,000 ($84,000)
HRA: $2,800 ($33,600)
Conveyance Allowance: $800 ($9,600)
Medical Reimbursement: $1,250 ($15,000)
Education Allowance: $200 ($2,400)
Food Coupon: $1,000 ($12,000)
Special Allowance: $10,315 ($123,780) (other allowances)
Total Deductions:
Employee PF: $780 ($9,360) (not part of CTC)
Employer Contribution: $780 ($9,360)
Employee ESI: $0 (0)
Employer ESI:
Professional Tax: $75 ($900) (not part of CTC)
Total Deductions: $1,635 ($19,620)
Net CTC: $25,000 ($300,000)
(Figures in brackets represent per year)
Additionally, the following can be included proportionately deducting from special allowances/other allowances:
1. Ex-gratia/bonus: $550 ($6,600) (Minimum bonus)
2. Gratuity (Basic + DA x 15 x years / 26): $338 ($4,050) (calculated for one year)
3. LTA: $1,250 ($15,000)
From India, Hyderabad
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1. Salary: Basic + DA + HRA + CCA
2. Other Allowances: Books & periodicals + servant allowance + any other allowances
3. Statutory payments: Provident Fund + Bonus + Gratuity
Exclusions:
1. Employee PF Contribution
2. ESI Contribution
3. Profession Tax
The calculation would be as follows:
CTC
Per month: $25,000
Yearly: $300,000
Basic: $7,000 ($84,000)
HRA: $2,800 ($33,600)
Conveyance Allowance: $800 ($9,600)
Medical Reimbursement: $1,250 ($15,000)
Education Allowance: $200 ($2,400)
Food Coupon: $1,000 ($12,000)
Special Allowance: $10,315 ($123,780) (other allowances)
Total Deductions:
Employee PF: $780 ($9,360) (not part of CTC)
Employer Contribution: $780 ($9,360)
Employee ESI: $0 (0)
Employer ESI:
Professional Tax: $75 ($900) (not part of CTC)
Total Deductions: $1,635 ($19,620)
Net CTC: $25,000 ($300,000)
(Figures in brackets represent per year)
Additionally, the following can be included proportionately deducting from special allowances/other allowances:
1. Ex-gratia/bonus: $550 ($6,600) (Minimum bonus)
2. Gratuity (Basic + DA x 15 x years / 26): $338 ($4,050) (calculated for one year)
3. LTA: $1,250 ($15,000)
From India, Hyderabad
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Hi Ruban,
1. Employee PF is not considered as a part of CTC.
2. Professional tax is not a part of CTC.
3. Special allowance can be fixed at Rs. 1000.
4. Other components could be Bonus, LTC (a percentage on basic), Fuel allowance, and Gratuity.
Regards,
Raghav
From India, Bangalore
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1. Employee PF is not considered as a part of CTC.
2. Professional tax is not a part of CTC.
3. Special allowance can be fixed at Rs. 1000.
4. Other components could be Bonus, LTC (a percentage on basic), Fuel allowance, and Gratuity.
Regards,
Raghav
From India, Bangalore
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