Hello HR professionals,
We are a USA manufacturer, starting a manufacturing unit in Gujarat- and are not versed at all about certain salary practices. Our MD in India has advised that when we offer gross annual salary to our employees in an appointment letter, we should break it down in several classes (Base Salary, Housing Allowanace, Car allowance, Vacation allowance, book purchase, Medical benefits etc.) This is done- we are told- so that the employee has less severe tax consequences.
Our USA president (me) is originally from India- so is our USA HR Manager (Archna Dhingra). But we are not much knowedgable (pretty ignorant as a matter of fact)in this matter.
Can someone educate us on the following:
1. If we hire a Production Supervisor-say, at a salary of Rs 20,000 per month, what categories should we break this salary?
2. Are there any guidelines as to what percent to apply for which class? (such as 15% for Housing- etc)
3. Can someone point us to web-sites, article etc on this subject.
4. We are going to provide housing to some key managers and cars to some others. How do we apply the break-down to them?
5. If we give medical allowance or vacation allowance, do we need to ask for proof of expense? Does this not encourage submission of fake bills?
Thanks a lot for your kindness in sharing your knowledge and wisdom.
-Rahul Shukla
President/CEO
S.S. White Technologies
Piscataway, NJ, USA
www.sswhite.net
e-mail:
From United States, Hoboken
We are a USA manufacturer, starting a manufacturing unit in Gujarat- and are not versed at all about certain salary practices. Our MD in India has advised that when we offer gross annual salary to our employees in an appointment letter, we should break it down in several classes (Base Salary, Housing Allowanace, Car allowance, Vacation allowance, book purchase, Medical benefits etc.) This is done- we are told- so that the employee has less severe tax consequences.
Our USA president (me) is originally from India- so is our USA HR Manager (Archna Dhingra). But we are not much knowedgable (pretty ignorant as a matter of fact)in this matter.
Can someone educate us on the following:
1. If we hire a Production Supervisor-say, at a salary of Rs 20,000 per month, what categories should we break this salary?
2. Are there any guidelines as to what percent to apply for which class? (such as 15% for Housing- etc)
3. Can someone point us to web-sites, article etc on this subject.
4. We are going to provide housing to some key managers and cars to some others. How do we apply the break-down to them?
5. If we give medical allowance or vacation allowance, do we need to ask for proof of expense? Does this not encourage submission of fake bills?
Thanks a lot for your kindness in sharing your knowledge and wisdom.
-Rahul Shukla
President/CEO
S.S. White Technologies
Piscataway, NJ, USA
www.sswhite.net
e-mail:
From United States, Hoboken
Hi Devendra,
Whenever we talk about " Reimbursements", it always implies that all the reimbursements should be in name of " EMPLOYEE AND NOT ON EMPLOYER,S NAME" because employer is giving all those to save tax of an employee.
Hope now the concept is clear to u.
KATYANA
From India, Gurgaon
35Whenever we talk about " Reimbursements", it always implies that all the reimbursements should be in name of " EMPLOYEE AND NOT ON EMPLOYER,S NAME" because employer is giving all those to save tax of an employee.
Hope now the concept is clear to u.
KATYANA
From India, Gurgaon
Hi
can you pl amplify the terms mentioned in the salary calculation format
e.g TA,FEP,MA etc
also can you confirm the percentage applied for each head
can you give me salary caculation for
a) 15000,
b) 18000
c) 50000
d) 70000 & 75000
so to enable the employee to save & reduce their tax burden
pl guide me
regards
From India, Mumbai
can you pl amplify the terms mentioned in the salary calculation format
e.g TA,FEP,MA etc
also can you confirm the percentage applied for each head
can you give me salary caculation for
a) 15000,
b) 18000
c) 50000
d) 70000 & 75000
so to enable the employee to save & reduce their tax burden
pl guide me
regards
From India, Mumbai
Hello Friends,
After posting my questions on salary structure, I searched the archives and found answers to most of my questions. This is a great website- and many of you have selflessly posted articles, spreadsheets etc. I wanted to send a thank-you e-mail to some of you- but it seems I cannot yet- until I make 5 postings.
So here is a general Thanks to all of you great guys.
-Rahul Shukla
SSWhite Technologies, USA
From United States, Hoboken
After posting my questions on salary structure, I searched the archives and found answers to most of my questions. This is a great website- and many of you have selflessly posted articles, spreadsheets etc. I wanted to send a thank-you e-mail to some of you- but it seems I cannot yet- until I make 5 postings.
So here is a general Thanks to all of you great guys.
-Rahul Shukla
SSWhite Technologies, USA
From United States, Hoboken
The above mentioned Salary Calculation is ENTIRELY WORNG.
No offense.
As per above method let us take an example of Person whose salary has been decided as 10,000/-
Further for complete clarification let us assume he has taken single Leave Each in Month of January (31 Days) & April (30 Days) & February (28 Days)
As per "gayathri.suraparaju" suggestion:
Per Day Salary in January: 10,000 / 31 = 322.60
Per Day Salary in February: 10,000 / 28 = 357.14
Per Day Salary in April: 10,000 / 30 = 333.33
Therefore it means your Per Day Salary varies Per Month!!!!!!!!
Hence, The Person's Salary (after deducting only Leave) will be as follows:
Salary For January: 10,000 - 322.60 = 9677.4
Salary For February: 10,000 - 357.14 = 9642.86
Salary For April: 10,000 - 333.33 = 9666.67
Even though he has taken only single day off, there will be huge difference in Salary in particular months.
HENCE Correct Salary Calculation should be:
Monthyl Salary = 10,000
Total Days in Year: 365
Hence Per Day Salary = 10,000 * 12 / 365 = 328.77 (Constant Value, Non-Variable)
Therefore the Person's Salary for individual Months IRRESPECTIVE OF CALENDAR DAYS will very only if Person Takes a LEAVE. NOT OTHERWISE!!
I Hope Salary Calculation will be a lot simpler Now.
Alap Desai
No offense.
As per above method let us take an example of Person whose salary has been decided as 10,000/-
Further for complete clarification let us assume he has taken single Leave Each in Month of January (31 Days) & April (30 Days) & February (28 Days)
As per "gayathri.suraparaju" suggestion:
Per Day Salary in January: 10,000 / 31 = 322.60
Per Day Salary in February: 10,000 / 28 = 357.14
Per Day Salary in April: 10,000 / 30 = 333.33
Therefore it means your Per Day Salary varies Per Month!!!!!!!!
Hence, The Person's Salary (after deducting only Leave) will be as follows:
Salary For January: 10,000 - 322.60 = 9677.4
Salary For February: 10,000 - 357.14 = 9642.86
Salary For April: 10,000 - 333.33 = 9666.67
Even though he has taken only single day off, there will be huge difference in Salary in particular months.
HENCE Correct Salary Calculation should be:
Monthyl Salary = 10,000
Total Days in Year: 365
Hence Per Day Salary = 10,000 * 12 / 365 = 328.77 (Constant Value, Non-Variable)
Therefore the Person's Salary for individual Months IRRESPECTIVE OF CALENDAR DAYS will very only if Person Takes a LEAVE. NOT OTHERWISE!!
I Hope Salary Calculation will be a lot simpler Now.
Alap Desai
Hi Katyana,
Your help has been invaluable.
I am grateful for your help in this regard.
My questions are as follows:
1. I won't be having a vehicle, so the driver , petrol and vehicle reimbursements go out.
2. In the changed circumstances, can I have a higher allowance as communication allowance , books and periodicals allowance, or entertainment allowance.
3. I would be grateful if you could suggest a structure with the least tax outgo.
Annual Monthly Taxable
BASIC SALARY 264,000 22,000 264,000
HOUSE RENT ALLOWANCE (HRA) 158,400 13,200 132,000
TRANSPORT ALLOWANCE 9,600 800
SPECIAL ALLOWANCE 33,000 2,750 2,750
Total (A) 465,000 38,750 398,750
COMMUNICATION REIMBURSEMENT 36,000 3,000 -
LTA 22,000 -
MEDICAL REIMBURSEMENT 15,000 1,250 -
BOOKS & PERIODICALS 12,000 1,000 -
Total (B) 85,000 7,083 -
Annual CTC (A + B) 550,000 45,833 398,750
Is the above split adequate with reference to Income Tax outgo? Or can it be done better.
Thanks and regards,
Jitendra
From India, Calcutta
Your help has been invaluable.
I am grateful for your help in this regard.
My questions are as follows:
1. I won't be having a vehicle, so the driver , petrol and vehicle reimbursements go out.
2. In the changed circumstances, can I have a higher allowance as communication allowance , books and periodicals allowance, or entertainment allowance.
3. I would be grateful if you could suggest a structure with the least tax outgo.
Annual Monthly Taxable
BASIC SALARY 264,000 22,000 264,000
HOUSE RENT ALLOWANCE (HRA) 158,400 13,200 132,000
TRANSPORT ALLOWANCE 9,600 800
SPECIAL ALLOWANCE 33,000 2,750 2,750
Total (A) 465,000 38,750 398,750
COMMUNICATION REIMBURSEMENT 36,000 3,000 -
LTA 22,000 -
MEDICAL REIMBURSEMENT 15,000 1,250 -
BOOKS & PERIODICALS 12,000 1,000 -
Total (B) 85,000 7,083 -
Annual CTC (A + B) 550,000 45,833 398,750
Is the above split adequate with reference to Income Tax outgo? Or can it be done better.
Thanks and regards,
Jitendra
From India, Calcutta
Hi Katyana, The above post is a bit jumbled up. I am attaching the excel file. Kindly go through it and make the any change that you feel will enhance the take home component. Thanks. Jitendra
From India, Calcutta
From India, Calcutta
Hi, Can I have a standard format of Salary Annexure with fixed and variable components? nayagam
From India, Madras
From India, Madras
Hi All, Would be grateful if you guys could suggest if the salary breakup is good. Can it be tweaked? What would be the income tax outgo ? Thanx JRC
From India, Calcutta
From India, Calcutta
Friends,
I have to develop the package structure in my company. What is the method followed for dividing the salary in to various components. Example if we fix a salary of 6 lakhs what should be the Basic, HRA and other allowances. Are there any legal terms we need to comply. Also please help me in LEAVE structures. How many CLs and PLs will be allowed and any statutory laws to be followed. I am working for a US consulting company in Hyderabad.
Regards,
TSRao
From India, Hyderabad
I have to develop the package structure in my company. What is the method followed for dividing the salary in to various components. Example if we fix a salary of 6 lakhs what should be the Basic, HRA and other allowances. Are there any legal terms we need to comply. Also please help me in LEAVE structures. How many CLs and PLs will be allowed and any statutory laws to be followed. I am working for a US consulting company in Hyderabad.
Regards,
TSRao
From India, Hyderabad
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Salary-Note.doc
SALARY SHEET CALCULATION.xls