Ctc

Cost to company, examples

1. COST TO COMPANY(CTC) & Salary breakup BY: KARISHMA GANJOO

2. COST TO COMPANY(CTC) CTC or Cost to Company is the total amount that a company spends (directly or indirectly) on an employee. It refers to the total salary package of the employee. CTC is never equal to the amount of take-home salary of the employee. CTC = Gross Salary + PF + Gratuity

3. BASIC SALARY Basic salary is the base income of an individual. It is a fixed part of one's compensation package . It is usually the largest component of the CTC making up for 40-45% of the total CTC.   The basic plays an important role in defining the salary as other components like Provident Fund, Gratuity and ESIC are dependent on it.

4. GROSS SALARY Gross salary is the amount calculated by adding up one's basic salary and allowances, before deduction of taxes and other deductions. It includes bonuses, over-time pay, holiday pay, and other differentials. Gross Salary = Basic Salary + HRA + Other Allowances

5. NET SALARY OR TAKE-HOME SALARY Net salary or take-home salary is obtained after deducting income tax at source (TDS) and other deductions as per the relevant company policy. Net Salary = Basic Salary + HRA + Allowances - Income Tax - Employer's Provident Fund - Professional Tax

6. IDEAL SALARY STRUCTURE

7. Component Recommendation Basic 40-50% of CTC DA 5% of CTC HRA 50% of Basic + DA if metro and 40% if non-metro Conveyance Rs . 1,600 a month Medical Rs . 1250 a month LTA No real benchmark, can even be used as a plug, but if not can set as 10% of Basic ESIC (Employer Contribution) 4.75% of Gross Salary ESIC (Employee Contribution) 1.75% of Gross Salary Provident Fund (Employer)* 12% of Basic + DA Provident Fund (Employee) 12% of Basic + DA Professional Tax As per statewise slabs Labour Welfare Fund As per state wise slabs

8. Net Income Income Tax Health and Education Cess Up to Rs . 2,50,000 Nil Nil Rs . 2,50,001-Rs. 5,00,000 5% of total income 4% of income tax Rs. 5,00,001-Rs. 10,00,000 Rs . 12,500 + 20% of total income – 5 lakhs 4% of income tax Above Rs. 10,00,000 Rs . 1,12,000 + 30% of total income – 10 lakhs 4% of income tax TAX SLAB:

9. EXAMPLE

10. COMPONENTS OF SALARY AMOUNT TAX TAXABLE AMOUNT Basic Salary 480,000 Full amount is taxable 4,80,000 DA 48,000 Depends on company policy. Mostly fully taxable. 48,000 HRA 96,000 Applicable if living in a rented house. Minimum of three amounts ( Note 1 ) 52,800 Conveyance Allowance 22,200 Conveyance allowance for up to Rs.19,200 per annum is exempt from tax i.e. 22,200-19,200=3000 3000 Entertainment Allowance 12,000 Fully taxable. 12,000 Overtime Allowance 12,000 Fully taxable 12,000 Medical Reimbursements 15,000 Exempt to a limit of Rs 15,000 annually GROSS SALARY 6,75,000 Gross Taxable Salary 6,07,200

11. HRA CALCULATION : The minimum of the three amounts will be exempt from tax : a. Actual HRA allowance in the salary package, that is Rs 96,000 OR b. HRA received less 10 per cent of salary and DA, that is 43,200 (96,000 – 10% of 528,000) OR c. If you live in metropolitan (Delhi, Chennai, Bombay and Calcutta), 50 per cent of salary and DA However, if you live in any other city, it is 40 per cent of salary + DA. So, in this case it would be Rs 2,11,200 (40% of 528,000) So HRA will be minimum of ( 96,000; 43,200; 2,11,200) which is 43,200 which will be exempted. So the portion that will be taxed in this example is = 96,000 – 43,200 = 52,800

12. TAX Tax 57,103 Employee PF contribution(12% of Basic) 57,600 Professional Tax  2400 Total Deductions 1,17,103 Net Salary = Gross Taxable Salary – Tax =6,07,200- 1,17,103=4,90,097 Net Monthly Salary = 490097/12=40,841.41 CTC- 7,32,600

13. FORM 16 The company issues a Form 16 which contains the details about the salary earned by the employee and the amount of tax deducted. The taxpayer is required to submit Form 16 to file the Income Tax returns every financial year. It acts as the proof of his/her income and tax paid to the government.

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