This India Salary Guide 2024 will help you learn the process of salary breakup step by step, providing valuable insights for everything involved.
Whether you are an employee, an HR professional, a fresher, or an experienced professional, understanding how a Salary Structure Breakup is prepared is crucial.
Introduction
Indian salary structure basically consists below mentioned parts, and its components are calculated based on percentage and fixed amounts. For some components the percentage calculation is very interdependent and may be complex to understand. However in this India Salary Guide 2024, we have tried explaining this calculations in maximum simplified way.
Indian Salary Structure - Parts & Components
- Part & Components of the salary structures are:
A. Earnings Component
- Basic
- DA
- HRA
- Medical Allowance
- Conveyance
- City Allowance
- Special Allowance
B. Deductions Components
- ESI Employee
- PF Employee
- Professional Tax
- Labour Welfare Fund
- Income Tax
C: Net Pay / In-Hand/ Take Home Salary
D. Employer Contributions
- ESI Employer
- PF Employer
- Labour Welfare Fund (Employer)
- Bonus
- Gratuity
E. Other Benefits
F. CTC/ Cost To The Company
G. Annual CTC
Let's understand each, one by one -
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| India Salary Guide 2024 |
A. Earning Components
Earning components refers to the various elements that make up your total salary or compensation package. Here's a breakdown of some common earning components -
A-I. Gross Salary
Sum of total earning components is called gross salary.
Ex:
Basic+DA+HRA+Allowances = Gross Pay
A-II. Basic Salary
This is the foundation of your salary and is typically expressed as a monthly amount. It forms a fixed portion of your take-home pay. It is calculated as 60% for metro cities (Chennai, Mumbai, Delhi, Hyderabad, Kolakata, Pune) and 50% for non metro cities (rest of the places anywhere in India) on gross salary or total earnings.
Ex:
- Gross Pay/ Total Earning is INR 25000/-.
- Basic for metro cities will be - 25000*60% = 15000.
- Basic for non metro cities will be - 25000*50%= 12500.
Sometime basic salary is considered as per minimum wages. If minimum wages defined by the state government for specified position, skill type and zone is more than 50% or 60% of gross salary then minimum wages is considered as basic pay, otherwise 50% or 60% of gross salary rule is followed for metro & non metro cities respectively. This is a fully taxable component.
Ex - 1:
- Minimum wages for Karnataka for Highly Skilled and Zone-I employee type is 15423/-
- 60% of 25000 is 15000 only which is less than above minimum wages of 15423.
- Then Basic will be followed as minimum wages - 15423
Ex - 2:
- Minimum wages for Karnataka for Skilled and Zone-I employee/ category type is 14021.27.
- 60% of 25000 is 15000 only which is higher than above minimum wages of 14021.27.
- Then Basic will be follows as 60% rule - 15000.
A-III. Dearness Allowance (DA):
Compensates for rising inflation. It is also a fully taxable component and generally calculated as 20% of basic pay. DA can also be defined under minimum wages for specified position, skill type and zone.
DA is generally included in 50/60% of basic pay and if it has to be shown separately for any compliance reason then it has to be calculated as follows -
Ex:
- If Gross is 25000
- Then Basic will be - 25000*60%=15000
- And DA will be calculated as - 20% * Basic (15000) = 3000
- Then actual Basic will be - 15000-3000 = 12000.
- And it will be written as Basic - 12000 & DA - 3000.
- All together Basic & DA will be 60% of the Gross/ Total Earnings.
- If DA to be followed as per minimum wages, then the minimum wages concept as explained in Basic pay should be applied.
A-IV. House Rent Allowance (HRA):
Helps offset your housing costs. It is normally calculated as 40% of Basic & DA. However a minimum of 5% HRA is compulsory as per compliance rule. HRA is tax exempted component under the HRA exemption rules.
Ex:
- If Basic is - 15000
- HRA will be - 15000*40% = 6000.
A-VI. Conveyance Allowance:
Reimburses travel expenses for commuting to work. It is optional component and paid as per organisation policy.
A-VII. Children's Education Allowance:
Helps cover school fees for your children. It is optional component and paid as per organisation policy.
A-VIII. Medical Allowance:
Covers medical expenses for yourself and your dependents. It is optional component and paid as per organisation policy.
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| India Salary Guide 2024 |
B. Deductions:
These are amounts deducted from your gross salary (basic salary + allowances) before you receive your net pay. Common deductions include:
B-I. Provident Fund (PF Employee):
A mandatory contribution towards your retirement savings deducted from you salary as 12% of Basic & Allowances except HRA, but if 12% of Basic & Allowance minus HRA is more than INR 1800 then its deductions is caped to as maximum deductions of INR 1800 only.
Ex:
- If Gross - HRA is 12000, then PF will be 12000*12% = 1440
- If Gross - HRA is 16000, then PF will be 1800 because 16000* 12% = 1920 which is higher than cap limit of 1800.
An employee has an option to opt out of PF deductions if these 2 conditions are met - 1. He or She was never enrolled as EPF Member and 2. Their basic & allowances - HRA is more than 15000. Employees with higher salary can also opt for VPF to contribute more in their PF accounts for saving & tax benefit.
B-II. Employee State Insurance (ESI Employee):
Provides medical and other benefits to employees and their dependents (applicable for companies with a certain number of employees) ESI is mandatory for the employee with gross salary 21000 & below and calculated as 0.75% on gross salary, but ESI is not applicable if gross is above 21000.
Ex:
- If Gross is 21000, then ESI will be 21000*0.75% = 157.5
- If Gross is 21001 (or more), then ESI = Not Applicable.
B-III. Labour Welfare Fund (LWF Employee):
LWF is state specific deduction, and it is a fixed amount - deducted monthly/ half yearly/ annually as certain amount state wise.
B-IV. Professional Tax:
A small tax levied by some state governments. It is also a fixed amount deducted from gross salary based on professional tax slab and state of employment. You can also try Professional Tax calculator by HR Calcy.
B-V. Income Tax (TDS):
Tax deducted at source, which you can later claim a refund for or adjust when filing your income tax return. Income tax is deducted from salary month on month based on tax slabs. This component is generally not mentioned in offer letter or revision letter. This only reflects in payslip.
HR Calcy has 3 types of Income Tax Calculator that you must try on-
- Old Regime - Income Tax Calculator
- New Regime - Income Tax Calculator
- New V/S. Old Regime Income Tax Calculator
C. Net Pay / In-Hand/ Take Home Salary
- Gross/ Total Earnings (Basic, DA, HRA, Allowance) - 25000
- All Deductions (ESI, PF, PT, LWF, I.Tax, etc.) - 6000
- Net Pay will be 25000 - 6000 = 19000.
You can try Take Home Salary calculator by HR Calcy.
D. Retrials & Employer Contributions:
Retrials & employer contributions components refer to the various elements that is contributed by the employer. These are -
D-I. Provident Fund (PF Employer):
A mandatory contribution towards your retirement savings contributed by your employer as 13% of Basic & Allowances except HRA but if 13% of Basic & Allowance minus HRA is more than INR 1950 then its deductions will be caped to as maximum deductions of INR 1950 only. Only 12% of PF is deposited to your accounts rest 1% is paid to PF admin charges.
Ex:
- If Gross - HRA is 12000, then PF will be 12000*13% = 1560
- If Gross - HRA is 16000, then PF will be 1950 because 16000* 13% = 2080 which is higher than cap limit of 1800.
D-II. Employee State Insurance (ESI Employer):
Provides medical and other benefits to employees and their dependents (applicable for companies with a certain number of employees). ESI is mandatory for the employer to contribute for the employees with gross salary 21000 & below and calculated as 3.25% on gross salary, but ESI is not applicable if gross is above 21000.
Ex:
- If Gross is 21000, then ESI will be 21000*3.25% = 682.5
- If Gross is 21001 (or more), then ESI = Not Applicable.
D-III. Labour Welfare Fund (LWF Employer):
LWF is state specific contribution by your employer, contributed monthly/ half yearly/ annually as certain amount state wise. It is a fixed amount.
D-IV. Bonus:
Bonus is paid by employer annually once for financial year from April to March and released during Oct/ Nov. Bonus is compulsory for employer to pay to its employees whose basic salary is 21000 and below per month. Minimum bonus paid is INR 7000/- annually or 8.33% of basic pay, whichever is higher.
You can refer and try here online Bonus calculator and it's calculation rules.
D-V. Gratuity:
Gratuity is paid after 5 years on continuous service without any gap in any employment. Gratuity is paid as - Current Monthly Basic Pay/ 26*15*No. of years of service.
You can refer and try here Online Gratuity calculator and it's calculation rules.