HI FRIENDS,
WHENEVER WE SWITCH OUR JOBS, WE HAVE 1 QUESTION IN OUR MIND THAT WHAT WOULD BE OUR IN HAND SALARY???
Most of us lose many good opportunities because we fail to understand what the term Cost to Company or CTC means. We calculate the "in-hand" salary but don't bother to understand what our salary slip carries.
Under Salary, you have basic salary, which is the main component of your salary slip. The break-up of your entire CTC is based on your basic salary. Your basic is also taxable as per the Income Tax rule.
Certain parts of your salary are exempt from tax while some components are taxable, unless you submit bills and other proof.
The amount in hand may get reduced because of two reasons
1. Taxation (which is the extent to which your salary is reduced)
2. Deductions, which are made and kept aside for future savings or till such time that they are claimed as tax exempt or taxable.
Taxation Components
Under taxation components, you have Income Tax and Profession Tax. These are sure deductions.
Income Tax
Income Tax is set by the Government. It mainly deals with the investment that you make if you are drawing a higher salary.
For women, there is a tax exemption up to a salary of Rs.1,45,000. But those who earn above this bracket, are required to pay income tax. If you produce investment documents, then you get an exemption.
Profession Tax
Profession Tax is a rule imposed by the Maharashtra Government. This means that if you are a salaried employee, you are required to pay profession tax.
The slab of deduction goes as follows.
Gross Salary Tax Payable
Upto Rs.2500 Not Taxable
Rs.2500 - Rs.3500 Rs.60
Rs.3500 - Rs.5000 Rs.120
Rs.5000 - Rs.10,000 Rs.175
Rs.10,000 and above Rs.200
However, the slabs for deductions vary from state to state.
Deductions
Under deductions you have Transport Allowance, LTA, Provident Fund, Medical and HRA.
Transport Allowance
The company gives you transport allowance to meet the expenses that you incur to commute from home to your work place. An amount of up to Rs.800 per month is exempt from tax.
LTA (Leave Travel Allowance)
LTA is a concession that an employer may pay you as a reimbursement towards any travel expenses within India that you may incur while on leave. These travel expenses may be incurred by you and your family.
To claim LTA, you have to submit your travel tickets, hotel bills and food bills. You can reclaim the amount that your bills work out to.
However, you can claim your LTA only twice in four years.
Provident Fund
When you get your salary in hand the amount towards PF for employer's contribution, as well the amount towards PF for employee contribution will be deducted.
You may feel that because of PF you are losing a lot from your salary. But don't worry, the PF ultimately goes into your kitty. When you resign, you can claim your PF savings or transfer it to your new PF account with the new company.
Medical
Medical is usually paid out with salary if you submit the bills; else this amount will also not be credited each month.
If you don't submit medical bills (up to a maximum of Rs.15,000 or your medical allowance, whichever is lower), you will have to pay tax on this component of your salary as well.
HRA (House Rent Allowance)
HRA is given to you as a compensation for any rent that you may be paying towards house accommodation; i.e.: only if you are actually paying rent. If you produce the bills you get an exempt up to 50%.
So, the next time you are made a job offer, do not turn it down on the basis of the "in-hand" aspect. You just might miss out on a good opportunity.
KATYANA
From India, Gurgaon
35WHENEVER WE SWITCH OUR JOBS, WE HAVE 1 QUESTION IN OUR MIND THAT WHAT WOULD BE OUR IN HAND SALARY???
Most of us lose many good opportunities because we fail to understand what the term Cost to Company or CTC means. We calculate the "in-hand" salary but don't bother to understand what our salary slip carries.
Under Salary, you have basic salary, which is the main component of your salary slip. The break-up of your entire CTC is based on your basic salary. Your basic is also taxable as per the Income Tax rule.
Certain parts of your salary are exempt from tax while some components are taxable, unless you submit bills and other proof.
The amount in hand may get reduced because of two reasons
1. Taxation (which is the extent to which your salary is reduced)
2. Deductions, which are made and kept aside for future savings or till such time that they are claimed as tax exempt or taxable.
Taxation Components
Under taxation components, you have Income Tax and Profession Tax. These are sure deductions.
Income Tax
Income Tax is set by the Government. It mainly deals with the investment that you make if you are drawing a higher salary.
For women, there is a tax exemption up to a salary of Rs.1,45,000. But those who earn above this bracket, are required to pay income tax. If you produce investment documents, then you get an exemption.
Profession Tax
Profession Tax is a rule imposed by the Maharashtra Government. This means that if you are a salaried employee, you are required to pay profession tax.
The slab of deduction goes as follows.
Gross Salary Tax Payable
Upto Rs.2500 Not Taxable
Rs.2500 - Rs.3500 Rs.60
Rs.3500 - Rs.5000 Rs.120
Rs.5000 - Rs.10,000 Rs.175
Rs.10,000 and above Rs.200
However, the slabs for deductions vary from state to state.
Deductions
Under deductions you have Transport Allowance, LTA, Provident Fund, Medical and HRA.
Transport Allowance
The company gives you transport allowance to meet the expenses that you incur to commute from home to your work place. An amount of up to Rs.800 per month is exempt from tax.
LTA (Leave Travel Allowance)
LTA is a concession that an employer may pay you as a reimbursement towards any travel expenses within India that you may incur while on leave. These travel expenses may be incurred by you and your family.
To claim LTA, you have to submit your travel tickets, hotel bills and food bills. You can reclaim the amount that your bills work out to.
However, you can claim your LTA only twice in four years.
Provident Fund
When you get your salary in hand the amount towards PF for employer's contribution, as well the amount towards PF for employee contribution will be deducted.
You may feel that because of PF you are losing a lot from your salary. But don't worry, the PF ultimately goes into your kitty. When you resign, you can claim your PF savings or transfer it to your new PF account with the new company.
Medical
Medical is usually paid out with salary if you submit the bills; else this amount will also not be credited each month.
If you don't submit medical bills (up to a maximum of Rs.15,000 or your medical allowance, whichever is lower), you will have to pay tax on this component of your salary as well.
HRA (House Rent Allowance)
HRA is given to you as a compensation for any rent that you may be paying towards house accommodation; i.e.: only if you are actually paying rent. If you produce the bills you get an exempt up to 50%.
So, the next time you are made a job offer, do not turn it down on the basis of the "in-hand" aspect. You just might miss out on a good opportunity.
KATYANA
From India, Gurgaon
Can u elaborate in detail ...... i mean if the employee is on probationary period for 6 mths then how the tax is deducted...and it is calculated for women employees
Hi Katyana,
Your posting is very informative.
Thanks for the efforts.
But i do have 1 question;
As you have mentioned; When you get your salary in hand the amount towards PF for employer's contribution, as well the amount towards PF for employee contribution will be deducted.
Is the employer's contribution also deducted from the employee's salary??
Please reply.
Regards,
Anu
From India, Pune
Your posting is very informative.
Thanks for the efforts.
But i do have 1 question;
As you have mentioned; When you get your salary in hand the amount towards PF for employer's contribution, as well the amount towards PF for employee contribution will be deducted.
Is the employer's contribution also deducted from the employee's salary??
Please reply.
Regards,
Anu
From India, Pune
Dear Friends,
Few thoughts on CTC and take home salary.
CTC is the total cost a company incurs on an employee. It is a good c oncept by which the employee is offered monthly components and annual components. For employee, he can avail IT exemption for annual components in the form of LTA, Medical allowance etc. Instead of drawing the full salary everymonth and spend without any planning, he can take the family to vacation or take care of medical expenses thereby fulfilling his family obligations. This also brings the loyalty of the family to the organisation. For employer, the monthly salary bill is kept under control and he can utilise the annual componet portion into business to look for more profit and obviously more increments and facilities for staff. Employer can make one time provisions in the month of March/April to release all annual components.
But of late, the organisations are adopting unfair practices. They include gratuity payable to the employee (whether the employee is eligible for gratuity or not), transport cost, staff welfare like supplying of tea, coffee, discounts offered on buying of company's products etc. By adding call these components, the CTC is like a big balloon. But when it comes to take home (you deduct all hidden components including employer's contribution to PF, which I explained above), it is a flattended balloon.
As a HR professional, I make sure that prospective candidate is explained fully about the salary components including take home and annual component. I am for fair and transparency in finalising salary. HR professionals should not mislead the candidate by showing dreams. While we should implement the company's policies, we should also be fair, open and transparent with the candidate. Otherwise, that employee will always have a grievance, which will lead to negativity and ultimately becomes a HR issue. Of course, we have to handle one more HR issue alongwith the existing one.
Regards
BHAVAN
From India, Bangalore
Few thoughts on CTC and take home salary.
CTC is the total cost a company incurs on an employee. It is a good c oncept by which the employee is offered monthly components and annual components. For employee, he can avail IT exemption for annual components in the form of LTA, Medical allowance etc. Instead of drawing the full salary everymonth and spend without any planning, he can take the family to vacation or take care of medical expenses thereby fulfilling his family obligations. This also brings the loyalty of the family to the organisation. For employer, the monthly salary bill is kept under control and he can utilise the annual componet portion into business to look for more profit and obviously more increments and facilities for staff. Employer can make one time provisions in the month of March/April to release all annual components.
But of late, the organisations are adopting unfair practices. They include gratuity payable to the employee (whether the employee is eligible for gratuity or not), transport cost, staff welfare like supplying of tea, coffee, discounts offered on buying of company's products etc. By adding call these components, the CTC is like a big balloon. But when it comes to take home (you deduct all hidden components including employer's contribution to PF, which I explained above), it is a flattended balloon.
As a HR professional, I make sure that prospective candidate is explained fully about the salary components including take home and annual component. I am for fair and transparency in finalising salary. HR professionals should not mislead the candidate by showing dreams. While we should implement the company's policies, we should also be fair, open and transparent with the candidate. Otherwise, that employee will always have a grievance, which will lead to negativity and ultimately becomes a HR issue. Of course, we have to handle one more HR issue alongwith the existing one.
Regards
BHAVAN
From India, Bangalore
Hi,
Really very informatics...
Nice one..
Anu-
[FONT='Verdana','sans-serif']“When you get your salary in hand the amount towards PF for employer's contribution, as well the amount towards PF for employee contribution will be deducted.”[/FONT]
[FONT='Verdana','sans-serif']Well, this depends upon company to company. In many companies employer deducts PF amount (both side – double deduction) from the employee’s salary only. And in many companies deduction is from one side. Like, if I am adding 12% in PF account, employer will add the same without deducting from my salary. [/FONT]
[FONT='Verdana','sans-serif']If I am wrong, then please let us know.[/FONT]
Thanks for sharing..
From India, Bangalore
Really very informatics...
Nice one..
Anu-
[FONT='Verdana','sans-serif']“When you get your salary in hand the amount towards PF for employer's contribution, as well the amount towards PF for employee contribution will be deducted.”[/FONT]
[FONT='Verdana','sans-serif']Well, this depends upon company to company. In many companies employer deducts PF amount (both side – double deduction) from the employee’s salary only. And in many companies deduction is from one side. Like, if I am adding 12% in PF account, employer will add the same without deducting from my salary. [/FONT]
[FONT='Verdana','sans-serif']If I am wrong, then please let us know.[/FONT]
Thanks for sharing..
From India, Bangalore
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