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Though, conceptually salary components are more or less same across the globe, this presentation focuses on employees working in India
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Basics
Gross Salary: is salary before deductions
Medium Term
Training to improve your knowledge & skill
On-job learning Employee stock options Health insurance Medical benefits
Long-term
PF
Gratuity Superannuation
Reimbursements
Basic salary
Basic salary is a fixed component of your takehome pay for the work you do! It is also the base of computations of other benefits like PF, Gratuity, LTA and sometimes HRA It is taxable and best if it is be around 40% of CTC. The paradox here is higher ratio of basic salary means more tax and low ratio means impact on social benefits like PF and Gratuity etc.
Allowances
Allowances paid to the employee irrespective of the expenditure incurred under the head of allowances. Majority of the allowances are taxable and few are partially taxable Receipts are to be produced to get partial exemption on tax
Dearness Allowance
It is the allowances is paid to neutralize impact of Inflation. This is something like making cost-of-living adjustments in your salary Usually DA is linked to Consumer Price Index. So, when the prices of commodities go up your DA goes up. If they come down your DA comes down! (It is very unlikely)
Conveyance Allowance
Transport allowance is paid to meet traveling expenses from residence to office Amount up to Rs 800 per month (Rs. 9,600 per year) is tax exempted no need to produce receipts. City compensatory allowance
Paid to compensate the costs involved in a city life! Taxable
Bonus
Bonus payment in many organization is governed by Payment of Bonus act 1965,India Usually paid once an year, mostly profit sharing with employees by the company some times as a percent of basic to all employees or may be based on employees performance and contribution There can be many types .here are few
Profit / Gain sharing Festival bonus Joining bonus Retention bonus Employee referral bonus
Bonus is Taxable
Reimbursements or Claims
Reimbursement of certain expenses like Phone, Mobile, Internet etc. Reimbursements are Tax free.
If you are entitled to Rest. 2000 Mobile expences, and you have a bill of Rest. 1000, You will get only Rs.1,000. Remember it is an reimbursement not an allowance!
Medical Reimbursement
Medical expenditure incurred on self or dependants Amounts up to Rs.15,000 per is not Taxable subject to submission of bills
Some organizations reimbursement health insurance premium paid for employee and his family. This is exempted from tax
Car
Value as taxable income is based on car capacity Less than 1600 CC
Reimbursed amount minus Rs 1,800 + Rs 900 for the driver/Month
Academic allowance
Any Allowance for perusing academics is Tax Free Proof of expenditure needed for tax exemption Asserts like Desktop / Laptop provided for official purpose is not taxable
Provident Fund
Its a Social Security fund for your post retirement It is mandatory for you to contribute 12% of your basic Salary + DA towards PF. The Employer also mandatorily contributes equal amount (12% of Basic + DA) towards Provident fund Your contribution as well as employer's contribution Increases with Increase in your Basic + DA You can contribute up to a maximum of 20% of your Basic salary +DA From 12% amount mandatorily deducted, 3.67% will be deposited in your PF account and Rest of 8.33 % will be credited to your Family pension fund.
Gratuity
Gratuity, as the name suggests, is a scheme to motivate employees to serve organizations for longer tenures and is essentially a part of salary paid by the company/employer at the time of retirement or at the time of separation as a gratitude for the services offered by the employee. 5 years of continuous service is minimum eligibility criteria for payment of Gratuity. Gratuity is computed based on a percent of your last drawn salary with a multiplier of number of years of service.
Superannuation
Superannuation is simply company pension plan or a retirement benefit.
The company contributes (15% of basic) on your behalf towards group superannuation policy.
Usually companies rely on organizations like LIC to manage their Superannuation Fund About 25% the amount contributed by the company will be paid with interest at the time of retirement. Rest is maintained by the organizations like LIC and will pay the employee at periodic intervals as selected by the employee Incase of resignation of the employee, he can choose to transfer the scheme to the new company or with draw the amount ,subject to the taxes applicable for such withdraws or can retain the amount till retirement.
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