Salary Structure and its components

          Salary Structure and its components 

 

Salary Structure and its components    (Gross Salary Vs Net Vs Cost to Company -CTC)

1.Gross Salary Vs Net Vs Cost to Company

2.Types of Deductions

3.In Hand Salary Calculations

4.Examples

                                             CTC – Cost to Company : 

1.This is a total salary Package of Employee.

2.It includes all the benefits received by employee in a year.

3.It is not actual salary of employee.

4.It is a total amount that a company spends on a Employee in a year.

5.It will never equal to the amount of money which employee take home.

                                             Breakup of CTC Package :

 

                     1.Gross Salary Components

                     2.Incentives

                     3.Other Expenses

                     4.Employer Side Provident Fund

                     5.Employer Side Employer State Insurance

                                                

                                            Gross Salary :

           1.Gross Salary is the salary which is before any deduction made from it.

           2.EPF (Employee Provident Fund) is subtracted from Gross Salary.

           3.Gross Salary Components contains Fixed Amount.

           4.ESI (Employee State Insurance) is subtracted from Gross Salary.

 

Components of Gross Salary

1.Basic Salary

2.House Rent Allowance

3.Special Allowances

4.Educational Allowances

5.Medical Allowances

6.Leave Travel Allowances   

 

                           NET Salary

 

1.Net Salary is the salary which is Employee takes home.  

NET Salary = Gross Salary – All Deduction 

Deduction = ( Employer Provident Fund + Employer ESI + Professional Tax + Income Tax)

 

Deduction Components

1.Income Tax 

2.EPF ( Employee Side) 

3.Pension 

4.Professional Tax 

5.Labour Welfare Tax 

6.ESI ( Employee Side)

For Exp. = Net Salary  =  Gross Salary - Deductions

                       = 19,222 – 1,497

                       = 17,725 /- Take home    

Example CTC = 21,000/-

Gross Salary         = CTC – Employer side PF (12% of Basic) – Employer side ESI ( 3.75% of Gross)

                                = 21,000 – 1,153 – 625

                                = 19,222

1.Basic Salary                 = 9,611/- (50% of Gross Salary)

2.HRA                               = 4,806/- ( Half of Basic Salary)

3.Special Allowances    = 4,606    ( Gross salary – (Basic + HRA + Education Allowance))

4.Education Allowance = 200       ( Fixed)

5.Employee side PF        = 1,153/- (12% of Basic Salary)

6.Employee side ESI       = 144/-   ( 0.75% of Gross Salary)

7.Professional Tax          = 200/-    ( Fixed – as per state)

8.Income Tax                   = 0/-         ( No Tax Applicable for less than 5lac Per year Salary)

Gross Salary = Basic Salary + HRA + Special Allowance + Educational Allowance

Deduction = Gross Salary – ( Employer Provident Fund + Employer ESI + Professional Tax + Income Tax)

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