this video explores ctc

1. COMPONENTS OF
CTC AS PER INCOME
TAX ACT

2. WHAT IS CTC?
TOTAL EXPENSES ANY ORGANIZATION PAYS ON ANY
EMPLOYEE IN A YEAR. COST TO COMPANY. CTC OR
COST TO COMPANY IS THE TOTALAMOUNT 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.

3. Why company considers CTC?
All benefits are included here . In senior level
company pays benefits in terms of perks in lieu of
cash component to save income tax for the
employee.

4. 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

5. NORMAL SALARY BREAKUP.

6. 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
NET 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

7. 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 40-50% of the gross salary/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.

8. HRA (HOUSE RENT ALLOWANCE)
HRA OR HOUSE RENT ALLOWANCE IS A BENEFIT PROVIDED BY EMPLOYERS TO THEIR
EMPLOYEES TO HELP THE LATTER COVER THEIR ACCOMMODATION EXPENSES OR THE COST OF
RENTING A HOUSE. HRA IS 40-50% OF THE BASIC SALARY.
IT CAN CLAIM A DEDUCTION FOR HRA UNDER SECTION 10(13A)
OF THE INCOME TAX ACT BUT REMEMBER IT CAN BE FULLY OR
PARTIALLY TAXABLE.
CONSIDER THE FOLLOWING EXAMPLE FOR A BETTER
UNDERSTANDING OF THE HRA CALCULATION:

9. Component Amount (INR/₹)
Basic Pay 25,000
HRA 8,500
Allowances 8,500
PF 3,000
Total Salary 45,000
MR. X LIVES AND WORKS IN PUNE. HE HAS A RENTED ACCOMMODATION, PAYING RS. 7,000
PER MONTH. HIS MONTHLY SALARY IS RS. 45,000, WITH THE FOLLOWING BREAK UP:

10. DEARNESS ALLOWANCE
D E A R N E S S A L L O WA N C E I S F U L LY TA X A B L E A N D I S A
C O S T O F L I V I N G A D J U S T M E N T A L L O WA N C E TO
M I T I G AT E T H E I M PA C T O F I N F L AT I O N O N P E O P L E .
I T I S PA I D TO G O V E R N M E N T E M P L O Y E E S , P U B L I C
S E C TO R E M P L O Y E E S ( P S U ) A N D L AT E LY TO P R I VAT E
S E C TO R E M P L O Y E E S TO O , D E A R N E S S A L L O WA N C E
I S C A L C U L AT E D A S A P E R C E N TA G E O F A B A S I C
S A L A RY. A S D A 1 0 0 % O F B A S I C S A L A RY I N G O V T.
S E C TO R A N D 1 0 - 2 0 % I N P R I VAT E S E C TO R J O B S .

11. Conveyance Allowance, also called transport allowance is a type of allowance
offered to employees of a company to compensate for their travel from
residence to and from respective workplace location. allowances are
generally offered to employees on top of their basic salary component and
may or may not be taxable as per the Income Tax Act. In general, conveyance
allowance is paid by an employer only if there is no transportation provided
by the employer. In case an employer offers office transport, conveyance
allowance will not be provided to employees. ₹1600 per month given for the
conveyance allowance (Tax exempted) above the taxable.
Personal Allowances Conveyance

12. Average monthly travel when on
office duty
Travel by
own car
Travel by other
modes of transport
201-300 km ₹ 1,680 ₹ 556
301-450 km ₹ 2,520 ₹ 720
451-600 km ₹ 2,980 ₹ 960
601-800 km ₹ 3,646 ₹ 1,126
More than 800 km ₹ 4,500 ₹ 1,276
LATEST INFORMATION ON CONVEYANCE ALLOWANCES FOR
CENTRAL GOVERNMENT EMPLOYEES

13. PF CONTRIBUTION OF THE EMPLOYER
EMPLOYER HAS TO CONTRIBUTE 13.16% OF BASIC SALARY. AFTER 15K PF IS NOT
MANDATORY.
ESI CONTRIBUTION OF THE EMPLOYER
E M P L O Y E R H A S T O C O N T R I B U T E 4 . 7 5 % O F G R O S S S A L A RY.
A f t e r 2 1 K E S I i s n o t a p p l i c a b l e .

14. PF CONTRIBUTION OF THE EMPLOYEE
EMPLOYEE HAS TO CONTRIBUTE 1.75% OF BASIC SALARY.
AFTER 15K PF IS NOT MANDATORY.
ESI CONTRIBUTION OF THE EMPLOYEE
E M P L O Y E E H A S T O C O N T R I B U T E 1 2 % O F G R O S S S A L A RY.
A f t e r 2 1 K E S I i s n o t a p p l i c a b l e .

15. Monthly Bonus
MONTHLY BONUS MEANS THE RECENT ANNUAL BONUS
DETERMINED ON THE DATE OF TERMINATION OF EXECUTIVE'S
EMPLOYMENT DIVIDED BY 12. A MONTHLY BONUS IS A
PERFORMANCE-BASED REWARD THAT CAN BE PAID AS PART OF
AN EMPLOYEE'S CTC (COST TO COMPANY). THE MINIMUM BONUS
IS 8.33% OF THE BASIC AND DEARNESS ALLOWANCE, WHICH IS
AROUND ONE MONTH'S SALARY.

16. LTA OR LEAVE TRAVEL ALLOWANCE
EMPLOYER PROVIDES LTA TO EMPLOYEE FOR EMPLOYEE’S TRAVEL TO
ANY PLACE IN INDIAALONE OR WITH THEIR FAMILY. LTA EXEMPTION IS
LIMITED TO THE EXTENT OF ACTUAL TRAVEL COSTS INCURRED BY THE
EMPLOYEE. LTA EXEMPTION ONLY IN RESPECT OF TWO JOURNEYS
PERFORMED IN A BLOCK OF FOUR CALENDAR YEARS. TRAVEL HAS TO BE
UNDERTAKEN WITHIN INDIAAND OVERSEAS DESTINATIONS ARE NOT
COVERED FOR THE EXEMPTION.

17. Labour Welfare Fund
1. Labour welfare is an aid in the form of money or necessities for those in need. It provides
facilities to labourers in order to improve their working conditions, provide social security,
and raise their standard of living.
2. To justify the above statement, various state legislatures have enacted an Act exclusively
focusing on welfare of the workers, known as the Labour Welfare Fund Act. The Labour
Welfare Fund Act incorporates various services, benefits and facilities offered to the employee
by the employer. Such facilities are offered by the means of contribution from the employer
and the employee. However, the rate of contribution may differ from one state to another. 20/-
from each employee & ₹ 40/- from the employer for each employee i.e., a total of ₹ 60/-per
employee to be remitted through online payment only.

18. Professional Tax
Profession Tax is a direct tax which is levied on persons earning an income by way of either
practicing a profession, employment, calling or trade. Unlike income tax which is levied by the
Central Government, profession tax is levied by the government of a state or union territory in
India. Majority but not all of the Indian states impose profession tax. While states like Karnataka
and Maharashtra have profession tax, there is no such tax applicable in Delhi and Haryana.
Profession Tax Rates of West Bengal as of 2023-2024

19. A GRATUITY IS A SUM OF MONEY CUSTOMARILY GIVEN BY A
CUSTOMER TO CERTAIN SERVICE SECTOR WORKERS SUCH AS
HOSPITALITY FOR THE SERVICE THEY HAVE PERFORMED, IN ADDITION
TO THE BASIC PRICE OF THE SERVICE.
Gratuity
SUPPOSE MR. A HAS WORKED WITH AN ORGANISATION FOR
5 YEARS, AND YOUR BASIC SALARY + THE AMOUNTED TO ₹
30,000 EVERY MONTH, YOU ARE ELIGIBLE TO RECEIVE
5*30000*15/26 = ₹ 86,538.46 AS GRATUITY.

20. PERQUISITE & ALLOWANCES
ITS GIVEN UNDER PERQUISITES ACT AS PER INCOME TAX ACT . IT’S THE
EXTRA BENEFITS AN EMPLOYEE ENJOYS FROM HIS EMPLOYER IN TERMS OF
ALLOWANCE. IS ANY BENEFIT OR AMENITY GRANTED OR PROVIDED FREE
OF COST OR AT CONCESSIONAL RATE SUCH AS RENT FREE UNFURNISHED
HOUSE, RENT FREE FURNISHED HOUSE, MOTOR CAR FACILITY,
REIMBURSEMENT OF GAS, ELECTRICITY & WATER, CLUB FACILITY,
DOMESTIC SERVANT FACILITY, INTEREST SUBSIDY ON LOAN ,
REIMBURSEMENT OF MEDICAL BILLS, REIMBURSEMENT OF HOSPITAL
BILLS, REIMBURSEMENT OF TELEPHONE BILLS, BENEFITS DERIVED BY
EMPLOYEE STOCK OPTION, AND SO ON.

21. List of allowable perks under income tax act .
1. CAR MAINTAINENCE ALLOWANCE: IF THE EMPLOYER-OWNED CAR IS USED BY THE EMPLOYEE, AND THE
EMPLOYER REIMBURSES DRIVER’S SALARY, INSURANCE, MAINTENANCE AND FUEL EXPENSES THE TAXABLE VALUE
WILL BE RS 2,700 PER MONTH (CAR WITH ENGINE CAPACITY UP TO 1,600 CC) OR ₹ 3,300 PER MONTH (CAR WITH
ENGINE CAPACITY MORE THAN 1,600CC). IF THE EMPLOYEE OWNS THE CAR, AN EXEMPTION OF ₹ 2,700 PER MONTH
OR RS 3,300 PER MONTH IN RESPECT OF THE DRIVER SALARY, MAINTENANCE AND FUEL EXPENSES BORNE AND
REIMBURSED BY THE EMPLOYER.
2. MEDICAL ALLOWANCE – THIS FINANCIAL YEAR HAS BROUGHT A HUGE RELIEF IN TERMS OF
MEDICAL EXPENSES FOR SELF AND DEPENDENTS. FROM FY 2019-20 ONWARDS, THE STANDARD
DEDUCTION HAS BEEN RAISED TO RS. 50,000.
3. Laundry Allowance: In circumstances where ‘special clothing’ is required
to be worn by the employee, and the employee is required to launder that
‘special clothing’, a laundry allowance will typically be triggered.

22. TYPES OF ALLOWANCES
1. FULLY EXEMPTED ALLOWANCES
1. These allowance are not at all taxable.
2. Foreign allowance given by govt. to employees posted abroad.
3. House rent Allowance given to judges of high court and supreme court.
4. Sumptuary allowance given to judges of high court and supreme court.
3. PARTIALLY TAXABLE ALLOWANCES
1. House rent allowance
2. Allowance paid to meet the cost of accommodation is known as HRA .
3. The minimum of the following exempt ctual HRA received.
4. Excess of rent paid over 10% of salary 50% of salary if the accommodation is in
metropolitan cities and 40% in case of other cities Taxable HRA= actual HRA received – exempted
amount.
2. Fully taxable allowances.
1. It is fully taxable
2. Dearness allowance
3. City/capital /compensatory allowance
4.Lunch/Tiffin/marriage/family/deputation/wardship/non-
practicing/project/overtime/medical allowance
5.Entertainment allowances: least of the following
statutory limit Rs5000.
6. 1/5th of basic salary only.
7. Actual entertainment allowance received during the year.

25. IDEAL SALARY
STRUCTURE

26. Component Recommendation
Basic 40-50% of CTC
DA 5% of CTC
HRA 50% of Basic + DA if metro and 40% if non-metro
Conveyance ₹ 1,600 a month
Medical ₹ 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)* 13.16% of Basic salary
Provident Fund (Employee) 12% of Basic Salary
Professional Tax As per state wise slabs
Labour Welfare Fund As per state wise slabs

27. Net Income Income Tax Health and Education
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:

28. 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
0
GROSS SALARY 6,75,000 Gross Taxable Salary 6,07,200

29. 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
TAX
CTC- 7,32,600
CTC CALCULATION