Employee Cost Calculator - India

Salaries in India are fixed payments employees receive for their work and are typically deposited at the end of every month. Although each company varies in structure and payments may differ accordingly, here are some of the more frequently encountered components that comprise an employee’s monthly compensation package:

1. Basic Salary: The basic salary represents 35-50% of gross pay and is fully taxable, providing the basis for other benefits such as Provident Fund (PF) contributions, bonuses and allowances. Usually determined based on role experience and industry norms
2. House Rent Allowance (HRA): HRA allows employees to cover housing costs. Employees living in rented accommodations may claim tax exemptions under Section 10(13A) of the Income Tax Act depending on certain criteria, such as rent amount and location (metro or non-metro cities). If an employee owns their home, however, HRA becomes fully taxable.
3. Leave Travel Allowance (LTA): LTA is offered to employees to cover travel expenses they incur during official leave. It is tax-exempt under the Income Tax Act provided certain criteria are met, and it is, therefore, an invaluable benefit for employees travelling during their time off. Essentially, it’s the ultimate perk.
4. Special Allowance: This allowance provides an additional payment above and beyond Basic Salary to cover personal or professional expenses that don’t count towards retirement benefits such as Pensionable Benefits (PF). Rather, this allowance is fully taxable.
5. Bonus: A bonus is an incentive awarded to employees based on their performance or company profitability, usually fully tax-deductible and may vary according to company policies. Bonuses serve as motivational tools by rewarding outstanding work performed.
6. Employee Provident Fund (EPF): EPF is a retirement savings scheme where both employer and employee contribute 12% of Basic Salary monthly into an accumulation account that can be accessed upon retirement. All contributions to EPFs are tax-deductible under Section 80C of the Income Tax Act.
7. Professional Tax (PT): Employers are required to deduct and remit Professional Tax on behalf of their employees, with a maximum annual cap of Rs2,500 depending on which state the tax falls in. Employers may collect this payment directly from employees as an administrative service fee or send in payments directly.

The Basic Salary is the fixed, taxable component of an employee’s pay, typically forming 35-50% of their gross salary. Employers determine this based on the employee’s role, experience, and industry benchmarks. Basic salary forms the foundation for statutory contributions like PF and gratuity.

Yes, Cost-to-Company (CTC) includes the employer’s contributions to statutory benefits like the Provident Fund (PF) and gratuity. For clarity:

CTC = Gross Salary + Employer PF + Gratuity Contributions.

As per the EPF Act, employers contribute 12% of the employee’s basic salary:

• If the basic salary is ≤ ₹15,000/month, 12% of the basic salary.
• If the basic salary exceeds ₹15,000/month, employers may cap the contribution at ₹1,800 or contribute 12% of the full basic salary.

Gratuity is a one-time benefit payable to employees who complete 5 years of service. Employers are legally required to calculate gratuity as follows:

Gratuity = (Basic Salary × Tenure × 15)/26.

It may also be paid earlier in cases of death or disability. Employers should account for gratuity as a long-term financial liability.

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