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    How to calculate salary breakup using salary breakup calculator

    Have a query about salary breakup calculation? Searching for the detailed procedure to do this? You can go through the responses from experts on this page and get answers to all the questions you are looking for.

    I am a fresher and working as HRM. I do not know how to calculate salary breakup and as a fresher am a little bit confused about this. I want to know in detail about salary breakup for calculating salary breakup from gross for our employees. Can you assist?
  • Answers

    5 Answers found.
  • You should see that your CTC will be divided into various heads wherein the tax liability will be minimum. There are different perks and other benefits are not taxable. So you should see that some portion of your salary will be kept into these heads.
    For full details and calculation, I advise you to see the following link.
    This link will give you all the required details.

    always confident

  • Salary is a general term for the remuneration and other perks paid by an employer to its employees. It can have many components like dearness allowance, conveyance allowance, entertainment allowance, canteen allowance, house rent allowance, quarterly performance bonus, annual bonus, travelling allowance etc etc.

    Now Some of the above may be reimbursements and not allowance. For example a company may give Rs 200 as reimbursement for washing of office dress. Another company may reimburse Rs 2500 per month for medical expenditures. Now these reimbursements are generally categorised under non taxable income. So employer will not consider them for tax purposes when they are deducting TDS from the salary of the employee.

    As an HR person you are supposed to be aware of these allowances and reimbursements and their tax implication. What I will suggest is go through the chapter on 'Income tax for salaries people' in the tax booklet provides by income tax department in their site. It has given component wise tax consideration and that will give a clear idea how these elements are treated for income tax purposes.

    For example if an employee goes out of station for office job he is entitled for to and fro ticket and boarding lodging charges. After return he submits his bill and gets the money reimbursed from office. So this is non taxable.

    Once you learn this you will have more clarity on various components and how to break the salary in best befitting manner so that the employee is satisfied towards his tax treatment.

    Knowledge is power.

  • Many new employees do not understand the concept of Cost To Company and the actual take home pay.The CTC is the grand total of many expenses incurred by the company that has employed you. If you look into this, it includes financial and non-financial benefits (basic pay,accomodation, medical reiembursiments, training costs etc). Hence the total CTC need not be equal to what acutally comes into your bank account everymonth.

    Most companies have the following components

    A.Salary. This includes basic pay,allowance for home rent and dearness grant,communiting costs.
    B.Reimbursments. This inculdes the telephone bills, medical bills, meal coupons
    C.Retirement benefits. This includes provident and gratuity payments
    D. Miscellaneous. for example leave travel, furnising, house staff

    There are many items in this that are eligible for tax exemption. Some experts advise negotiating with HR team for discontinuing some items from the above so that your take home pay is more than what you have received.

    You can check this thread that gives your the explanation and the tax implications (

  • Salary for employees in organised sectors contain many ingredients. It will have two major components, the fixed component and the variable component. The fixed component is called the Basic Salary or Basic Pay(BP). The others are allowances. The allowances will be determined as a percentage of the BP. The employer may also give the employee many other facilities by way of reimbursement or yearly allowances like Leave travel allowance, Medical allowance, Medical reimbursement, Bonus, incentives etc. But they will not form part of their monthly salary.These will not be shown precisely in the appointment letter and may be just mentioned only as additional benefits.
    Though the prevalent mode of salary in non-organised sector, small firms and proprietary concerns is just a consolidated wage or salary , in the new generation multinational organisations and especially in IT sector. the concept is Cost To Company or CTC.
    Under CTC, the employer calculates, fixes and offers the total amount of expense incurred by the company on an employee. That will include the smallest pie spent on the employee from the office time coffee to the statutory and mandatory retirement benefits like provision for provident fund, pension etc.
    In the conventional style, a new employee is advised as being recruited in the salary scale of (so-and-so ) Basic Salary with the added mandatory benefits of DA,HRA,CCA permissible and eligible as per terms in force, applicable to the place of posting.
    So if the offer is for Basic Pay of Rs 10,000/- then his salary slip will show the components like DA (30 % of Bp for the month) =3000, HRA (2% of BP =200, CCA 1% of BP =100; Gross salary =13300.
    Probably the next month, if DA is increased to 12%, then DA will be 12000.that month onwards till next change.
    In the CTC mode of salary an employee is advised as offered a compensation of Rs 3,00,000/. This is the figure for a year .The monthly emoluments that the employee gets will, not be 25,000/-(offer divided by 12) but will be less.
    If the employer fixes the fixed pay as 1,20,000 , the Fixed allowance as 90,000, Conveyance as 12000, Leave Travel Allowance as 10000, House Rent Allowance as 12000, City Compensatory Allowance as12,000;Quarterly Performance Pay as 20,000,; PF contribution as 14400(12% of FP) Medical Insurance premium as 9600;
    Then the monthly salary slip for eg February may show as:
    FP=10,000,FA =7500,CA=1000,LTA=833.33,HRA=1000, CCA=1000;. This will total to 20333.33.
    The Medical Insurance premium and employer's contribution 1200 are expenses paid by the employer and hence will not be given to you, but shown as an accounting entry only. Your contribution to PF will be shown in the deduction column as PF- 1200 and your net salary will be 20333.33-1200=19133.33.
    Some employers give a part of the monthly a compensation as food coupons and if so this may not come in te salary, and salary will be less to that extent. Food coupon or food credit will be given separately.
    For March, if the person deserves the QPP depending on the project assigned and accomplished, then an additional amount will be shown QPP=1666.66.
    Some employers give the employee some flexibility to request for re adjusting the components to suit his tax liability subject to permissible limits.

  • Salary which is given by the companies to the employees has various components. But mainly salary can be divided into two major groups as basic pay and allowances.Allowances includes House rental allowance,bonus,Leave travel allowance etc.And salary also includes Provident fund paid by the employee.And all items in salary are not taxable .For example, if an employee goes on annual leave or privilege leave and after coming back, that employee can submit the tickets and can claim that Leave Travel Allowance which is non-taxable.

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