What is My Salary Structure?....

When I asked many people which is the most memorable day of there life and 50% people answered when I got my first salary of my career and why not it should be. But I observed  many people don’t know there salary structure, many fresher as well as  experienced people after getting salary come to me with there salary slip and appointment letter and ask siddharth please tell me what is my CTC,what is my gross salary, why I got less salary, I am really confused.

HR just explained them once at the time of joining and hand over the appointment letter and employee also doesn’t care and after getting salary slip they get confused for what reason they got less salary.

Here will see in very simple language how salary structure is designed.

Salary structure varies from company to company but anonymously consist of five parts:

1. Gross Salary
2. Variable
3. CTC
4. Total deduction
5. Net Pay

1. Gross Salary: Gross Salary is nothing but your fixed salary. Gross Pay is total pay for that period before deduction and taxation.

   a. Basic Salary (40% of CTC as per rule)
   b. DA (Dearance allowance)(20 % of Basic as per rule)
   c. HRA (50% of basic or 40% of basic as per rule)
   d. Medical reimbursement (1250 pm as per rule)
   e. LTA (depends on company norms)
   f. Special allowance or City compensatory allowance
   e. Food coupon (depends on company norms)
   g .Conveyance or Transport allowance(800 pm as per rule)
   h. Education allowance (200 pm as per rule)

2. Variable: Variable means extra salary apart from gross given by company . It consists
   of  following components
   a. Performance based bonus (8.33 to 20% of gross as per rule)
   b. Incentives (depends on company norms)
   c. Employer’s contribution to PF A/C (13.61% of basic as per rule)
   d. Employer’s contribution to ESIC A/C (4.75% of basic as per rule)
   e. Mediclaim (depends on company norms)
   f. Gratuity (depends on company norms)

3.CTC: CTC is nothing but your gross plus variable. When people go for an interview many times      get confused  between gross salary and CTC 
so always remember Gross plus variable will give you CTC

4. Total deduction: Now total deduction means deduction happening from employee’s pocket. It     contains
a. Employees contribution to PF (12% of basic as per rule)
b. Employees contribution to ESIC (1.75% of basic as per rule)
c. Income Tax means TDS (As per income tax rules)
d. Professional Tax (As per income tax rules)

5. Net Pay : Net pay is payment received after total deduction from gross salary.It directly gets    credited into your account.

Example,Mr.X working with a Pvt.firm and has CTC is 4.75 LPA now will design his salary structure

Components	Per month	Per annum
Basic Salary	14000	168000
House Rent Allowance	7000	84000
Transport Allowance	800	9600
Medical Reimbursement	1250	15000
Education Allowance	200	2400
Special Allowance	9570	114840
Meal Coupon	1100	13200
LTA	1080	12960
Gross Salary	35000	420000
Bonus	2917	35004
E.R. contribution to PF	1680	20160
CTC	39596	475152

Now will see few allowances each of gross in detail how actually calculate to reduce the tax liability:

1. Allowances/ Reimbursements- Allowances are normally paid irrespective of the employee actually incurring them. These are fully taxable if no bills are provided. However, if the expenses are incurred actually and bills provided, they are not taxable up to a specified limit under each head.
2. Conveyance: For conveyance, up to Rs.800 per month is allowed as deduction without providing any bills.
3. Medical Allowance: Bills have to be provided; up to Rs.15,000 per annum is allowed as deduction. This can be claimed for self, spouse, children, parents and siblings who are dependent on the assessee.
4. Leave and Travel Allowance:2 trips in a block of 4 years is allowed and only travel within India can be claimed as deduction. So unfortunately you won't be able to claim for those Myrtle beach flights! It can be claimed for self, spouse, children, parents but only if the employee (assessee) is travelling along with them. There is no maximum limit on this, but the unutilized amount will be paid once the block is completed (after deducting taxes).
5. Education Allowance: An amount of up to Rs.2,400 per annum is tax-free.
6. Qualification Allowance: An amount of Rs.24,000 per annum is tax-free.
7. Training Allowance: An amount of up to Rs.14,000 per annum is tax-free if the employee provides relevant bills.
8. Telephone Allowance: An amount of Rs.12,000 per annum is tax free if the phone is used for official purposes and bills submitted.
9. HRA: House Rent Allowance can be claimed if one lives in a rented premises and the rent exceeds 10% of the salary. The actual HRA exempted from tax is least of the following:

• The actual amount of HRA received.
• 40% of salary. This increases to 50% if you are renting out the house in Delhi, Mumbai, Chennai or Kolkata
• Rent paid minus 10% of salary (basic component + dearness allowance)
• Salary for the purpose of HRA means: Basic + D.A (only if it is forming part of salary for retirement benefits) + commission (if it’s a fixed % of sales turnover).

Hello All

Let me introduce myself I am Siddharth Desai working as Assistant Manager Payroll with an MNC,after spending many years into India Payroll I thought why not to share some information, latest news and my experience in Payroll to those who are looking to make career in Payroll through this blog. 

First of all let me tell you I am not from finance background or I am not B.com or M.com graduate,I am a plane B.Sc.graduate,I came into payroll indecently.So its nothing to do with the graduation to become a good payroll specialist.

But yes one should have some inbuilt skills which of course you will not get from any institution or not from any degree.You need to be very active,alert and focused that's it.I am going to share what are the qualities one should have to become a Payroll professional in my next post.

Feel free to ask any of you queries on Payroll related issues,on taxation I will answer those as per my information and of course you comments are equally important to me so please comment on each post.

Regards,
Siddharth