Basic Salary component %age in Total Salary
This query is : Resolved
13 June 2009
Has any Income tax rule or any other act prescribed that out of total Salary of an employee how much amt in terms of %age should necessasrily be Basic Salary?
13 June 2009
Hi
There is rule restricting basic..
But, very generally, you could follow this :
Basic : 30 - 35% of CTC
HRA : 50% of Basic
DA : Regulated by Govt. notifications (nominal amounts)
CCA : Is normally a filler on negotiated salary (put the balance amount in
this). Otherwise, 30% of CTC
Gratuity : Is statutory (consider 4.81%)
Superannuation : 15% - 27% of basic (27% if there is no PF)
Leave Encashment : Taxable under provision of IT Act.
Tax deduction is based on various things like HRA claim (least of the 3 conditions under the IT Act - could also be non-taxable if claimed properly), investments done by employee, attraction of 80C/cca, (basic, cca fully taxed based on IT slabs), etc.
The above comp. structure can be tweaked or more components added based on the Co's requirements. That needs a discussion.....
There is rule restricting basic..
But, very generally, you could follow this :
Basic : 30 - 35% of CTC
HRA : 50% of Basic
DA : Regulated by Govt. notifications (nominal amounts)
CCA : Is normally a filler on negotiated salary (put the balance amount in
this). Otherwise, 30% of CTC
Gratuity : Is statutory (consider 4.81%)
Superannuation : 15% - 27% of basic (27% if there is no PF)
Leave Encashment : Taxable under provision of IT Act.
Tax deduction is based on various things like HRA claim (least of the 3 conditions under the IT Act - could also be non-taxable if claimed properly), investments done by employee, attraction of 80C/cca, (basic, cca fully taxed based on IT slabs), etc.
The above comp. structure can be tweaked or more components added based on the Co's requirements. That needs a discussion.....
Message likes :
2 times
13 June 2009
Hi,
Agreed that we can follow this but i wants to know that whether some any act prescribes any minimum or maximum limit upto which Basic salary shd form component in total CTC? Furhter, i would like to know that how shd a company calculate its Gratuity Provision liability at year end?
Agreed that we can follow this but i wants to know that whether some any act prescribes any minimum or maximum limit upto which Basic salary shd form component in total CTC? Furhter, i would like to know that how shd a company calculate its Gratuity Provision liability at year end?
14 June 2009
No act answers your question, conventions followed by the members of various trade associations like ASSOCHAM, FICCI etc which release the cost of living /monthly price index for their members to fix the periodical DA/VDA rates, you can contact the body to which your client/institution is a member for clarity.
16 June 2009
There is no rule either in income tax act or any other ,which states that so much % should be basic.
Maximization of tax benefits to employee, minimization of costs to employer and requirements of HR to tie up level with basics of salery to enable convient handling of large number of employees are some of the key drivers for fixing basics.
Maximization of tax benefits to employee, minimization of costs to employer and requirements of HR to tie up level with basics of salery to enable convient handling of large number of employees are some of the key drivers for fixing basics.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- About TDS & Income Tax
- Scrutiny and reopening of past returns
- Pass word to open justification report for Q1 for FY 2026-27
- PPF interest-As Exempt Income disclosure
- Section 194JA & JB Income which ITR Form to use
- Type of Capital Gain
- Booth for sales promotion
- F & O PROFIT REPORTING FOR AY 2026-27
- Grand in aid
- Accounting with Claude
- TDS on Rent received on redevelopment of building
- Tax on Deemed Capital Gain
- Indian IT Portal issue in computing tax as per UK-India DTAA
- Capital Gains on sale of residential flat
- Upload Level ValidationITR3Category of Defect B/D
- PF Taxable Income
- Clarification on Tax Audit Applicability and Reporting of F&O Transactions in ITR-3
- Interest credited in FY2025-2026 & TDS therein by EPFO does not reflect in AIS or Form 26AS
- 44ad eligble money lending interest
- Taxation in the hands of Landowner under JDA
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
