As per the PF act, the contribution is payable only on basic wages.What consitutes basic wage is million dollar question.Various courts have given different interpretation like what are the earned componets while on duty or on leave is basic.Hence other than HRA is basic.Such basic wage accotrding to the act is restricted to Rs.6500. Another view is that, when their is contract of employment is prevail, what the employer and employee agrees as wages by bifrcution is basic. This is the well settled position by supreme court.However department is taking the corporates for ride by the Gujart High court decision and the industries should address the issue in the proper forum by litiation or representation.
The main affecting industries are shop act and contract workers.
gk
From India, Madras
The main affecting industries are shop act and contract workers.
gk
From India, Madras
Its so nice that Sanjukta has taken the initiative. However, I feel in companies the basis - allowance ratio is about 50 - 50 of CTC.
AS far as saving tax is concerned, there have been more and more precise guidelines from IT Department. You can avail 15000 PA as Medical allowance. This is exempted subject to producing bills. You can benefit from Conv. Allowance - 9600 PA.
HRA if calculated @ 40 % of basis serves the purpose.
As such the investment and limits are set 100000 PA. So we cant do much with salary structure.
Many companies indulge into voucher payment which is not a professional way to save tax. Some time back the practice of food coupens were very famous but their limit is upto 15000 PA. This can be tried.
LTA Reimbursement is exempted for twice in a slab of 4 years. This is a good option. We pay LTA Reimb. of Rs. 20000 PA to managers. This helps.
Veiws from others invited please.
- HIten
From India, New Delhi
29AS far as saving tax is concerned, there have been more and more precise guidelines from IT Department. You can avail 15000 PA as Medical allowance. This is exempted subject to producing bills. You can benefit from Conv. Allowance - 9600 PA.
HRA if calculated @ 40 % of basis serves the purpose.
As such the investment and limits are set 100000 PA. So we cant do much with salary structure.
Many companies indulge into voucher payment which is not a professional way to save tax. Some time back the practice of food coupens were very famous but their limit is upto 15000 PA. This can be tried.
LTA Reimbursement is exempted for twice in a slab of 4 years. This is a good option. We pay LTA Reimb. of Rs. 20000 PA to managers. This helps.
Veiws from others invited please.
- HIten
From India, New Delhi
Hi hiten,
Gujarath decision: GUJARAT CYPROMET LTD VS.ASSISTANT PROVIDENT FUND COMMISSIONER 2004 III CLR 485.
Department means: Provident fund department
Industries means : all industries to whom 7A proceeding is intiatied on the above subject.
gk
From India, Madras
Gujarath decision: GUJARAT CYPROMET LTD VS.ASSISTANT PROVIDENT FUND COMMISSIONER 2004 III CLR 485.
Department means: Provident fund department
Industries means : all industries to whom 7A proceeding is intiatied on the above subject.
gk
From India, Madras
Yes you are right for Basic - 50% on CTC. But I would like to know more details on how to save tax... so that we can show benefit to employees. - sanjukta
From India, Mumbai
From India, Mumbai
Hi All,
I agree with you all that it depends on company's policy.
However, one should also take into consideration of local law to plan their tax payouts and statutory compliances.
For example in fixing 50% of salary for Metro cities and 40% for other cities are worked on the logic to avail House Rent Allowance exemptions to employees as per Income Tax Act in India.
Further, there are some labuor laws that are prevailing in India which needs consideration. Since past 18 months EPF department in Karnataka has taken a view that employers are reducing the basic salary to avoid PF contribution. They felt it as anti labour welfare practice and asking the employer who is paying less than 50% Gross Salary as basic salary to pay CPF contribution on Gross salary which includes allowances. Appeal by employers to Honorable high court has be set aside. It went in favour of department.
HR community should take note of these aspects while working out components of salary.
Rgds
Vishwanath
From India, Bangalore
I agree with you all that it depends on company's policy.
However, one should also take into consideration of local law to plan their tax payouts and statutory compliances.
For example in fixing 50% of salary for Metro cities and 40% for other cities are worked on the logic to avail House Rent Allowance exemptions to employees as per Income Tax Act in India.
Further, there are some labuor laws that are prevailing in India which needs consideration. Since past 18 months EPF department in Karnataka has taken a view that employers are reducing the basic salary to avoid PF contribution. They felt it as anti labour welfare practice and asking the employer who is paying less than 50% Gross Salary as basic salary to pay CPF contribution on Gross salary which includes allowances. Appeal by employers to Honorable high court has be set aside. It went in favour of department.
HR community should take note of these aspects while working out components of salary.
Rgds
Vishwanath
From India, Bangalore
HI cud u pls tell me shd the sal structure be 100% including PF & ESI or all the components except PF & ESI to be 100% of the ctc Regards Yash
From India
From India
Dear Friends
According to Govt rules the Basic should be 60% of the CTC or 6500. If the basic is 6500 with a lesser % then there will not be any problem. But when the basic is less the 6500 then we should make sure that the basic is not less that 60%.
Thanks
Kavitha S
From India, Coimbatore
According to Govt rules the Basic should be 60% of the CTC or 6500. If the basic is 6500 with a lesser % then there will not be any problem. But when the basic is less the 6500 then we should make sure that the basic is not less that 60%.
Thanks
Kavitha S
From India, Coimbatore
Hi Kavita, Is that the rule? because we are maintaining standard structure for all employees means Basic - 50%. - sanjukta
From India, Mumbai
From India, Mumbai
Dear Kavitha,
Can you provide the Government rule to state that the basic should be 60%. In my 35 of compliance service I never heard such rule.It will really help me and persons like me. In my view if their is a contract of employment and the employee and employer agrees for some percentage of CTC as basic, may be it can be 60% or so.
Pl. highlight the rule
gk
From India, Madras
Can you provide the Government rule to state that the basic should be 60%. In my 35 of compliance service I never heard such rule.It will really help me and persons like me. In my view if their is a contract of employment and the employee and employer agrees for some percentage of CTC as basic, may be it can be 60% or so.
Pl. highlight the rule
gk
From India, Madras
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Provident Fund Percentage Table.pdf
To Calculate the percentage.xls