Dear, If not eligible for any tax exemption, is there any relevance in splitting the salary in various heads?
From India, Ahmadabad
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From India, Ahmadabad
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There is no direct benefit of it. However, in some cases, the employer can save money by lowering the basic wages.
In most cases, the 'breakup' was an exercise that has lost its benefit long ago but carried on due to corporate inertia or because HR feels they need to do to look professional.
From India, Mumbai
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2642In most cases, the 'breakup' was an exercise that has lost its benefit long ago but carried on due to corporate inertia or because HR feels they need to do to look professional.
From India, Mumbai
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In our country, the original salary structure consisted of Salary (Such Salary was called Basic Salary) plus D.A. (Dearness Allowance). Wherein payment of D.A. was directly linked to Consumer Inflation Index and was variable. Therefore, all attendant benefits like Provident Fund, Employees Insurance, Gratuity, Bonus were attached to the Basic Salary.
The same practice was adopted by the private sector but replacing D.A. (Dearness Allowance) by Special Pay.
Thereafter, HRA (House Rent Allowance) was made exempt under the Income Tax Act with certain conditions. HRA between 10% and 40% of Basic Salary (In case of Metro Cities) and between 10% and 30% of Basic Salary (In case of Other Cities) was made exempt if the employee is staying in a rented accommodation and is paying rent equal to or more than that. Similarly, later on, Conveyance Allowance of Rs. 1600/- per month was also made exempt under the Income Tax Act.
Therefore, the special pay was further split into HRA, Conveyance Allowance, and Special Pay.
The private sector can devise any structure that helps them to retain an employee, and there is nothing wrong in this as it has a win-win situation for both the employee and employer.
Jawaharlal Moondra
9829 028 028
From India, Jodhpur
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The same practice was adopted by the private sector but replacing D.A. (Dearness Allowance) by Special Pay.
Thereafter, HRA (House Rent Allowance) was made exempt under the Income Tax Act with certain conditions. HRA between 10% and 40% of Basic Salary (In case of Metro Cities) and between 10% and 30% of Basic Salary (In case of Other Cities) was made exempt if the employee is staying in a rented accommodation and is paying rent equal to or more than that. Similarly, later on, Conveyance Allowance of Rs. 1600/- per month was also made exempt under the Income Tax Act.
Therefore, the special pay was further split into HRA, Conveyance Allowance, and Special Pay.
The private sector can devise any structure that helps them to retain an employee, and there is nothing wrong in this as it has a win-win situation for both the employee and employer.
Jawaharlal Moondra
From India, Jodhpur
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