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Salary structure

manoj kachkure (Accountant) (38 Points)

05 September 2014

meaning of salary structure? is it compulsory to bifurcate salary in multiple head i.e. basic, DA, hra etc. as per IT law's? thanks in advance.

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11 Replies

shiwani vaishnav singh (Sr. Accountant) (32 Points)
Replied 06 September 2014

Yes,becoz bifurcate means what are you giving to an employee and according the this they get benefit like pf,hra,lta etc. It should b mentioned

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@VaibhavJ (Believe!! Live your dreams!) (33516 Points)
Replied 06 September 2014

and .. certain allowances are mandatory as per labour law, so you need to pay it..

Thanks

MANJIT SINGH SAHDEV (Manager Accounts) (23 Points)
Replied 06 September 2014

in my opnion their is no need to bifurcate the salary as per law.

manoj kachkure (Accountant) (38 Points)
Replied 06 September 2014

what will be the ratio for this bifurcation?

sneha khemka (CA, article assistant) (72 Points)
Replied 06 September 2014

According to me, yes it is cumpulsory to bifurcate salary as per IT lAW, And there is no ratio of bifurcation its is prescribed by the employer to its employee....

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@VaibhavJ (Believe!! Live your dreams!) (33516 Points)
Replied 06 September 2014

Originally posted by : MANJIT SINGH SAHDEV
	in my opnion their is no need to bifurcate the salary as per law.

Dear Manjit,

Can you justify why there is no need?

Thanks!

@VaibhavJ (Believe!! Live your dreams!) (33516 Points)
Replied 06 September 2014

Originally posted by : manoj kachkure
	what will be the ratio for this bifurcation?

Basic salart should be 40% of your Gross Salary;

HRA min 5% of Basic , Max 50% of Basic Salary;

Conveyance Allowance Rs. 800 max;

Child Edu. Allowance Rs. 200 max;

Medical Reimbursement Rs. 1250 (only if salary is taxable)

Statutory Bonus Rs. 292 p.m. / Max Rs. 700 p.m. (If basic salary is 10k or less p.m.)

LTA 3% of Gross Salary (only if salary is taxable)

Fule Reimbursementts Rs. 2000 - Rs. 6000

Rest salary can be allocated to Perofrmence Bonus, Other Allowance, CCA etc.

Thanks!

Puran Singh Dangwal (Executive Finance & Accounts) (101 Points)
Replied 07 September 2014

Dear All

IT act doesnot say as to how we should pay salary. It states the rule how a particular components is taxed or exempted from Tax.

If you pay full salary as basic without any bifurcation into Basic,HRA,Conv,Gen Allowance and Flexi basket( Medical, LTA, and other reimbursements), the effect will be like

Full salary is taxed, means more tax on salary, less take home to employee.
More cost to employer in terms of Bonus/Gratuity/ Leave encashment/ Provident Fund..

Hence in mutual interest( of employer and employee), the structure is desiged by the company so that maximum part of the salary is taxfree.

Regards

Puran Dangwal

muthulakshmi (ca student ) (113 Points)
Replied 07 September 2014

Yes I agree with Puran. Its not that you shouldn't pay conveyance allowance more than 800 . Its just slab for exemption as per IT. Bifurcate so that tax can be avoided to Max extent.

CA. Anoop Gadia (CA MBA (Finance) B.Com) (1717 Points)
Replied 08 September 2014

As per IT act there is requirement of bifraction of salary but in normal practice companies offering CTC which includes Basic, DA, HRA, Conyn. , etc. Good tax free element is good to reduce tax on CTC.

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N. Rajendran (Manager - Accounting) (40 Points)
Replied 09 September 2014

Hi All...As per IT Law there is exemption for HRA, so that if anybody wants to claim this exemption they need to Bifurcate their Salary Structure,you can also claim Sec.10 exemptions like TA and medical Allowance.

Below are the General Salary Structure:

Gross Salary(PM) Rs. 35000

Basic: 40% of Gross Salary

HRA 50% for Metro City and 40% for Non-Metro from Basic Salary

TA: 800 Pm

Medical: 1250 Pm

Rest of the amount goes to Special Allowance which is fully Taxable..

Thanks

N. Rajendran--Manager-Accounts