Salary structure
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
01 May 2012
Hi,
I am working as an Accounts officer at a sole proprietorship firm providing software development services. Our employee strength is 60 now. I joined the company recently and i want to implement a proper salary structure. Right now only Prof. tax is deducted from salary.
How can i implement Esi, PF, and other allowances in the salary structure please advice. What are the critieria for registering for PF and Esi. And how can i show other allowances like, medical allowances, children education allowance etc from salary.
I am working as an Accounts officer at a sole proprietorship firm providing software development services. Our employee strength is 60 now. I joined the company recently and i want to implement a proper salary structure. Right now only Prof. tax is deducted from salary.
How can i implement Esi, PF, and other allowances in the salary structure please advice. What are the critieria for registering for PF and Esi. And how can i show other allowances like, medical allowances, children education allowance etc from salary.
01 May 2012
Register under PF & ESIC.
Deduct the payroll taxes at appropriate rates.
Break up the annual CTC into different components such as Basic + Allowances that you want to consider as salary components.
Further, deduct TDS as per the slabs.
hope this helps! let me know.
Deduct the payroll taxes at appropriate rates.
Break up the annual CTC into different components such as Basic + Allowances that you want to consider as salary components.
Further, deduct TDS as per the slabs.
hope this helps! let me know.
Querist : Anonymous
Querist :
Anonymous
(Querist)
02 May 2012
Thanks for your reply. But for PF registration is required when the basic salary of employee id less than 3500 pm , here we have only 8 to 9 employees with less than 3500 pm rest all are above 10,000. What can be the ideal CTC structure as the employees are demanding for allowances that can save their tax .
03 May 2012
For PF registration the minimum no. of employees need to be atleast 20.
Further, Salary (as per PF act) has to be 6500 & above for deducting PF.
Further, Salary (as per PF act) has to be 6500 & above for deducting PF.
03 May 2012
There are no ideals for CTC break up.
However, you can include its components as:
Basic
HRA
Education allowance
Travelling allowance
Others
Let me know should you need further details.
However, you can include its components as:
Basic
HRA
Education allowance
Travelling allowance
Others
Let me know should you need further details.
Querist : Anonymous
Querist :
Anonymous
(Querist)
09 April 2013
Hello Sir,
Have this query regarding allowances. Do i require to collect proofs from employees for considering allowances like education allowance, hostel allowance, professional attire allowance, books and magazine allowance for calculating TDS dedcution.
Have this query regarding allowances. Do i require to collect proofs from employees for considering allowances like education allowance, hostel allowance, professional attire allowance, books and magazine allowance for calculating TDS dedcution.
22 July 2025
Here’s a clear rundown to help you implement a proper salary structure, including PF, ESI, and allowances, plus how to handle proofs for allowances:
---
### 1. **PF & ESI Registration Criteria**
* **Provident Fund (PF):**
* Mandatory if your establishment has **20 or more employees**.
* Applies to employees earning **₹15,000 or less** per month (basic + DA).
* If less than 20 employees, PF registration is voluntary.
* **Employee State Insurance (ESI):**
* Applicable if you have **10 or more employees** (in some states, the threshold is 20).
* Employee’s gross salary must be **₹21,000 or less per month**.
---
### 2. **Salary Structure (CTC) Components**
Break the annual Cost to Company (CTC) into components:
| Component | Typical % or amount | Notes/Tax treatment |
| -------------------------------------------------- | ------------------------------ | ----------------------------------------------- |
| Basic Salary | 35-50% of CTC | Basis for PF, ESI, Gratuity |
| House Rent Allowance (HRA) | 20-40% of CTC | Exempt under Sec 10(13A) subject to conditions |
| Conveyance Allowance | Fixed (₹1,600 per month limit) | Exempt up to ₹1,600/month |
| Medical Allowance | Fixed amount | Exempt up to ₹15,000/year with bills |
| Education Allowance | ₹100/month per child | Exempt up to 2 children |
| Special Allowance | Balance amount | Fully taxable |
| Other Allowances (like Professional Attire, Books) | As required | Usually taxable unless reimbursed against bills |
---
### 3. **Documentation & Proofs for Allowances**
* **Allowances like Education, Hostel, Medical, Books:**
* Usually **proof is not mandatory** for basic education allowance and hostel allowance (subject to limits).
* For **medical and professional attire reimbursements**, **proof (bills/receipts) is required** to claim exemption.
* **TDS Compliance:**
* Allowances that are taxable should be included in the gross salary for TDS.
* Allowances exempt under income tax need to be supported by proofs where applicable; else, they may be fully taxable.
---
### 4. **Steps to Implement**
* Register for PF and ESI if criteria meet.
* Communicate new salary structure to employees with clear breakup and tax impact.
* Maintain proper records and get necessary proofs from employees for exemptions.
* Deduct TDS based on gross salary after exemptions.
---
If you want, I can help you draft a **sample salary breakup** and a checklist for proofs needed. Would you like that?
---
### 1. **PF & ESI Registration Criteria**
* **Provident Fund (PF):**
* Mandatory if your establishment has **20 or more employees**.
* Applies to employees earning **₹15,000 or less** per month (basic + DA).
* If less than 20 employees, PF registration is voluntary.
* **Employee State Insurance (ESI):**
* Applicable if you have **10 or more employees** (in some states, the threshold is 20).
* Employee’s gross salary must be **₹21,000 or less per month**.
---
### 2. **Salary Structure (CTC) Components**
Break the annual Cost to Company (CTC) into components:
| Component | Typical % or amount | Notes/Tax treatment |
| -------------------------------------------------- | ------------------------------ | ----------------------------------------------- |
| Basic Salary | 35-50% of CTC | Basis for PF, ESI, Gratuity |
| House Rent Allowance (HRA) | 20-40% of CTC | Exempt under Sec 10(13A) subject to conditions |
| Conveyance Allowance | Fixed (₹1,600 per month limit) | Exempt up to ₹1,600/month |
| Medical Allowance | Fixed amount | Exempt up to ₹15,000/year with bills |
| Education Allowance | ₹100/month per child | Exempt up to 2 children |
| Special Allowance | Balance amount | Fully taxable |
| Other Allowances (like Professional Attire, Books) | As required | Usually taxable unless reimbursed against bills |
---
### 3. **Documentation & Proofs for Allowances**
* **Allowances like Education, Hostel, Medical, Books:**
* Usually **proof is not mandatory** for basic education allowance and hostel allowance (subject to limits).
* For **medical and professional attire reimbursements**, **proof (bills/receipts) is required** to claim exemption.
* **TDS Compliance:**
* Allowances that are taxable should be included in the gross salary for TDS.
* Allowances exempt under income tax need to be supported by proofs where applicable; else, they may be fully taxable.
---
### 4. **Steps to Implement**
* Register for PF and ESI if criteria meet.
* Communicate new salary structure to employees with clear breakup and tax impact.
* Maintain proper records and get necessary proofs from employees for exemptions.
* Deduct TDS based on gross salary after exemptions.
---
If you want, I can help you draft a **sample salary breakup** and a checklist for proofs needed. Would you like that?
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
- GSTR9- ITC
- Audit of F and O T/O
- GST 9- Table 8
- REVENUE RECOGNITION AS PER IND AS 115
- RCM on GTA Services
- How to update Transaction data in broker samco account holding after transfer shares KARVY
- Applicablity on tds
- Unable to generate and save json file for updated return
- GST payable under RCM
- WRONGLY UPLOADED 10IF FOR COOPERATIVE SOCIETY
- Related to Rate of Depreciation
- Mismatch of Sales Invoice in GSTR-1
- Query on Mismatch of Sales Invoice in GSTR-1
- Import purchase entry
- Rule 54(1A) for Distributing ITC
- EXCESS CREDIT REALTED GST REVERSAL
- Export invoice not reported
- CA Articleship Extension Matter
- GST OFFICER WRONG NOTICE
- "Please ensure that the Total of the Deductions u/s 54F match the same in Table D in Sch CG"
Trending Online Classes
CAclubindia
