{"id":11436,"date":"2019-10-24T12:53:35","date_gmt":"2019-10-24T07:23:35","guid":{"rendered":"https:\/\/www.techjockey.com\/blog\/?p=11436"},"modified":"2025-07-29T15:52:24","modified_gmt":"2025-07-29T10:22:24","slug":"new-salary-structure-in-india","status":"publish","type":"post","link":"https:\/\/www.techjockey.com\/blog\/new-salary-structure-in-india","title":{"rendered":"Revised Salary Structure in India &#8211; All You Need to Know"},"content":{"rendered":"\n<p>Payroll calculation can be a complicated process if it isn\u2019t streamlined. While the payroll processes for calculating salary structure in India vary from one business to another, there are specific components that remain constant, such as standard deductions and taxes.<\/p>\n\n\n\n<p>Moreover, various laws specific to the location such as the Minimum Wages Act, Labour Welfare Act, and Payment of Salary and Wages Act needed to be implemented along with other Indian salary structure components like Basic, HRA, and DA.<\/p>\n\n\n\n<p>A Revised Code on Wages, 2019 has been proposed with the purpose of improvising the existing wage and remuneration paid by government and private companies to their employees. The change is most likely to come into effect from 1st July 2022.<\/p>\n\n\n\n<p>This article aims to inform you about the revised salary structure for FY 2022-23 as per the new wage code to be implemented.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-salary-structure-in-india-all-you-need-to-know-2022-23\"><span class=\"ez-toc-section\" id=\"salary_structure_in_india_all_you_need_to_know_2022-23_\"><\/span>Salary Structure in India: All You Need to Know 2022-23 <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As a layman, often employees struggle to understand the salary structure format implemented by their organisation. This leads to miscommunication and often leaves employees irate and disgruntled about the deductions.<\/p>\n\n\n\n<p>However, if the salary structure becomes clear, employees would not only be able to clear the confusion on their own, but also be able to save unnecessary hassles of exchanging emails with the payroll department.&nbsp;<\/p>\n\n\n\n<p>Given below is a detailed breakdown of the standard salary structure format:<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Fixed Salary Component<\/strong><\/td><td><strong>CTC (Up to 5 Lakhs)<\/strong><\/td><td><strong>CTC (From 5 to 10 Lakhs)<\/strong><\/td><td><strong>CTC (Above 10 Lakhs)<\/strong><\/td><td><strong>PF<\/strong><\/td><td><strong>PT<\/strong><\/td><td><strong>ESIC<\/strong>   <\/td><td><strong>LWF<\/strong><\/td><\/tr><tr><td><strong>Basic (Revised)<\/strong><\/td><td>Taxable (50% of CTC) or set minimum wage<\/td><td>Taxable (50% of CTC)<\/td><td>Taxable (50% of CTC)   <\/td><td>\n  Yes\n  <\/td><td>Yes<\/td><td>Yes   <\/td><td>Yes<\/td><\/tr><tr><td><strong>HRA<\/strong><\/td><td>Taxable (50% of Basic)<\/td><td>Taxable (50% of Basic)<\/td><td>Taxable (50% of Basic)<\/td><td>\n  No\n  <\/td><td>Yes<\/td><td>Yes<\/td><td>Yes<\/td><\/tr><tr><td><strong>Education Allowance<\/strong><\/td><td>200 Fixed<\/td><td>200 Fixed <\/td><td>200 Fixed<\/td><td> Yes  <\/td><td>Yes<\/td><td>Yes<\/td><td>Yes<\/td><\/tr><tr><td><strong>LTA<\/strong><\/td><td>15% of Taxable<\/td><td>15% of Taxable<\/td><td>15% of Taxable<\/td><td> Yes  <\/td><td>Yes<\/td><td>Yes<\/td><td>Yes<\/td><\/tr><tr><td><strong>Special Allowance<\/strong><\/td><td>Balancing<\/td><td>Balancing  <\/td><td>\n  Balancing \n  <\/td><td>\n  Yes\n  <\/td><td>Yes<\/td><td>Yes<\/td><td>Yes<\/td><\/tr><tr><td><strong>Phone &amp; Internet Reimbursements<\/strong><\/td><td>1000 (Fixed)  <\/td><td>2000 (Fixed)<\/td><td>3000 (Fixed)<\/td><td>\n  No\n  <\/td><td>No. But calculated for the unclaimed figure taxable.<\/td><td>No<\/td><td>No<\/td><\/tr><tr><td><strong>Vehicle Reimbursement (Applicable   to those who own car)<\/strong><\/td><td>Not Applicable<\/td><td>Not Applicable<\/td><td>Fuel \u2013 10000 Fixed<\/td><td>No<\/td><td>No. But calculated for the unclaimed figure which is taxable.<\/td><td>No<\/td><td>No<\/td><\/tr><tr><td><strong>Driver Reimbursement<\/strong><\/td><td><\/td><td><\/td><td>Driver \u2013 8000 Fixed<\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td><strong>Meal Coupon<\/strong><\/td><td>Not Applicable<\/td><td>2000 Fixed<\/td><td>2000 Fixed<\/td><td>NA<\/td><td>Not Applicable<\/td><td>NA<\/td><td>Not Applicable<\/td><\/tr><tr><td><strong>Books &amp; Periodicals<\/strong><\/td><td>Not Applicable<\/td><td>1000 Fixed<\/td><td>2000 Fixed<\/td><td>\n  No\n  <\/td><td>No. But calculated for the unclaimed figure taxable<\/td><td>No<\/td><td>No<\/td><\/tr><tr><td><strong>PF (Employer)<\/strong><\/td><td>\u20b91800 per month<\/td><td>\u20b91800 p.m.   <\/td><td>\u20b91800 p.m.   <\/td><td>NA<\/td><td>Not Applicable<\/td><td>NA<\/td><td>Not Applicable<\/td><\/tr><tr><td><strong>ESIC (Employer)<\/strong><\/td><td>4.75% of Total Salary<\/td><td>Not Applicable<\/td><td>Not Applicable<\/td><td>NA<\/td><td>Not Applicable<\/td><td>NA<\/td><td>Not Applicable<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\"><em>Note: The Salary structure on the table is a preferred structure for private companies per the New Wage Code for F.Y 2022-23. The allowances are subject to the maximum allowed allowance as per Income Tax India, 1961. Private companies can restructure pay slips for the best tax planning and welfare of employees, subject to the regulations of Wage Code and Income Tax Act.<\/em><\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-calculate-salary-structure-for-employees-in-india\"><span class=\"ez-toc-section\" id=\"how_to_calculate_salary_structure_for_employees_in_india\"><\/span>How to Calculate Salary Structure for Employees in India?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If you\u2019re looking to create an accurate salary structure, three things should be kept in mind which are:<\/p>\n\n\n\n<ul>\n<li>Reduce the liability of the employer<\/li>\n\n\n\n<li>Should be compliant with norms like minimum wages, PF laws<\/li>\n\n\n\n<li>The total salary amount should be divided in a way that it is tax efficient<\/li>\n<\/ul>\n\n\n\n<p>The salary structure in India of every employee in a company is unique. There are several factors based on which the salary structure of an employee is defined. Some of these factors are:<\/p>\n\n\n\n<ul>\n<li>Skill set that the employee possesses<\/li>\n\n\n\n<li>Location of the job and the cost of living in a town<\/li>\n\n\n\n<li>Prevailing market rate<\/li>\n\n\n\n<li>Industry\/sector that they belong to<\/li>\n\n\n\n<li>Years of experience in the industry<\/li>\n\n\n\n<li>Talent supply and demand in a given area<\/li>\n<\/ul>\n\n\n\n<p>Keeping the above mentioned factors into mind, the general formula used for calculating pay structure in India is as follows:<\/p>\n\n\n\n<p class=\"has-background\" style=\"background-color:#e3e3e3\"><strong>Pay Structure = Basic Pay + HRA + Overtime Pay + Dearness Allowance (DA)<\/strong><\/p>\n\n\n\n<p>Here is, however, a detailed breakdown of the salary components for a better understanding:<\/p>\n\n\n\n<ul class=\"has-background\" style=\"background-color:#e7e7e7\">\n<li><strong>CTC<\/strong> = Gross Salary + Health Insurance + EPF<\/li>\n\n\n\n<li><strong>Basic<\/strong> = 40% of CTC amount<\/li>\n\n\n\n<li><strong>DA<\/strong> = 55% of basic salary<\/li>\n\n\n\n<li><strong>HRA<\/strong> = 50% of basic salary in metro city<\/li>\n\n\n\n<li>Health insurance<\/li>\n\n\n\n<li><strong>Total Allowances<\/strong> = HRA + medical + transport allowance + LTA + special allowance<\/li>\n\n\n\n<li><strong>Gross Salary<\/strong> = Basic salary + allowances<\/li>\n\n\n\n<li><strong>TDS<\/strong> = 10% of gross salary<\/li>\n\n\n\n<li><strong>EPF<\/strong> = 12% of (basic salary + DA)<\/li>\n\n\n\n<li><strong>Total deductions<\/strong> = Professional tax (\u20b9200 per month for salaries above \u20b920,000 = \u20b92,400 per year)\u202f+ TDS (10%) + EPF employee contribution (12%)<\/li>\n\n\n\n<li><strong>Net salary<\/strong> = Basic salary + allowances &#8211; deductions<\/li>\n<\/ul>\n\n\n\n<p><strong style=\"font-size:24px;\">Salary Deductions for FY 2020-21<\/strong><\/p>\n\n\n\n<p>Deductions from employee salary is where most of the confusion arises. But if you know about all the standard salary deductions in India, this can easily be avoided. Have a look at the salary deduction format given below, to know more:<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Deductions<\/strong><\/td><td><strong>How is it calculated?<\/strong><\/td><td><strong>Whom does it apply to?<\/strong><\/td><\/tr><tr><td><strong>Provident Fund (PF)<\/strong><\/td><td>Both employee and employer contribute 12% of Basic Salary + DA + Special<br>(However, employers can fix their contribution as \u20b91,800\/month, for employees drawing more than \u20b915,000)<\/td><td>Organizations that consist of 20 employees or more. It is compulsory for employees whose   Basic, DA and Special allowances amount to less than \u20b915,000 per month.<\/td><\/tr><tr><td><strong>Employees&#8217; State Insurance Corporation (ESIC)   <\/strong><\/td><td>Employer   Contribution of 4.75% of Gross Salary; Employee Contribution of 1.75% of Gross Salary   <\/td><td>Organizations that consist of 20 employees or more, with their respective gross salary of below   \u20b921,000 per month, then it\u2019s applicable to all employees.<\/td><\/tr><tr><td><strong>Professional Tax<\/strong><\/td><td>Varies from one state to another<\/td><td>All employees<\/td><\/tr><tr><td><strong>Labour Welfare Fund<\/strong><\/td><td>Varies from one state to another<\/td><td>All employees, based on designation<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-salary-breakup-structure-2021\"><span class=\"ez-toc-section\" id=\"salary_breakup_structure_2021\"><\/span>Salary Breakup Structure 2021<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Salary format for employees have various components that need to be <a href=\"https:\/\/www.techjockey.com\/blog\/top-10-payroll-software-feature\">kept in mind while processing payroll<\/a>. Some of these remain constant while others may vary depending upon factors such as days worked, salary bracket and regions. Here are all the main components that are implemented while calculating salary:<\/p>\n\n\n\n<ol>\n<li><h3><span class=\"ez-toc-section\" id=\"ctc\"><\/span>CTC<span class=\"ez-toc-section-end\"><\/span><\/h3><\/li>\n<\/ol>\n\n\n\n<p>Cost to Company (CTC) is the net amount that an organisation invests on an employee. It comprises of the net payroll package of the particular employee.<\/p>\n\n\n\n<p>Cost to Company is the combination of monthly components like basic salary, allowances, reimbursements, etc. along with annual components like annual variable salary, gratuity, annual bonus, etc.<\/p>\n\n\n\n<p>An employee\u2019s CTC structure in India is never the same as his\/her take-home salary. There are several of variable components in CTC that aren\u2019t included in their monthly take-home package.<\/p>\n\n\n\n<p class=\"has-background\" style=\"background-color:#e6e6e6\"><strong><em style=\"font-size:18px;\">CTC = Gross Salary +PF + Gratuity + Other Indirect Benefits<\/em><\/strong><\/p>\n\n\n\n<p>Here are the other components of salary used while calculating payroll.<\/p>\n\n\n\n<ol start=\"2\">\n<li><h3><span class=\"ez-toc-section\" id=\"basic_salary\"><\/span>Basic Salary<span class=\"ez-toc-section-end\"><\/span><\/h3><\/li>\n<\/ol>\n\n\n\n<p>Basic salary of an employee is their base income. It is a fixed component of an employee\u2019s payroll package. The employee\u2019s basic salary will vary depending on his\/her industry and particular designation in the organization.<\/p>\n\n\n\n<ol start=\"3\">\n<li><h3><span class=\"ez-toc-section\" id=\"gross_salary\"><\/span>Gross Salary<span class=\"ez-toc-section-end\"><\/span><\/h3><\/li>\n<\/ol>\n\n\n\n<p>Gross salary refers to the sum of an\nemployee\u2019s basic salary and various allowances, calculated before tax and other\ndeductions. It includes bonuses, over-time, and other allowances.<\/p>\n\n\n\n<p class=\"has-background\" style=\"background-color:#e6e6e6\"><strong><em style=\"font-size:18px;\">Gross Salary = Basic Salary + HRA + Other Allowances<\/em><\/strong><\/p>\n\n\n\n<p>or<\/p>\n\n\n\n<p class=\"has-background\" style=\"background-color:#e6e6e6\"><strong><em>Gross Salary = CTC \u2013 Gratuity \u2013 EPF (Employer Contribution)- ESIC (Employer Contribution) &#8211; Other Indirect Benefits<\/em><\/strong><\/p>\n\n\n\n<ol start=\"4\">\n<li><h3><span class=\"ez-toc-section\" id=\"take-home_salary\"><\/span>Take-Home Salary<span class=\"ez-toc-section-end\"><\/span><\/h3><\/li>\n<\/ol>\n\n\n\n<p>Take-home salary is calculated by deducting\ntax deductions at source (TDS) and other such deductions in accordance to the\ncompany policies.<\/p>\n\n\n\n<p><em style=\"font-size:18px;\"><strong>Net Salary = Gross Salary &#8211; Professional Tax &#8211; Income Tax &#8211; Employer&#8217;s Provident Fund<\/strong><\/em><\/p>\n\n\n\n<ol start=\"5\">\n<li><h3><span class=\"ez-toc-section\" id=\"allowances\"><\/span>Allowances<span class=\"ez-toc-section-end\"><\/span><\/h3><\/li>\n<\/ol>\n\n\n\n<p>Allowance is the sum received by employees for meeting job requirements. Allowances are additional financial benefits included with the basic salary and differ from one company to another. A few standard types of allowances covered under the latest salary components is India are:<\/p>\n\n\n\n<ul>\n<li><strong>House Rent Allowance (HRA):<\/strong> This is provided to employees for expenses if they live in a rented establishment.<\/li>\n\n\n\n<li><strong>Leave Travel Allowance:<\/strong> LTA is the sum paid by the organisation to compensate for domestic travel expenses of employees. It generally doesn\u2019t include expenses on food, accommodation, etc. incurred while travelling.<\/li>\n\n\n\n<li><strong>Conveyance\/Commutation Allowance:<\/strong> This is given to employees to compensate for their regular commutation expenses to the workplace.<\/li>\n\n\n\n<li><strong>Dearness Allowance:<\/strong> DA is paid to employees to subdue the effects of economic inflation. It\u2019s applicable to public sector employees, government employees, and pensioners.<\/li>\n\n\n\n<li>Other allowances such as medical allowance, special allowance, and other incentives.<\/li>\n<\/ul>\n\n\n\n<ol start=\"6\">\n<li><h3><span class=\"ez-toc-section\" id=\"reimbursements\"><\/span>Reimbursements<span class=\"ez-toc-section-end\"><\/span><\/h3><\/li>\n<\/ol>\n\n\n\n<p>Sometimes, employees are provided various\ntypes of reimbursements such as phone bills, medical treatments, office\nstationery and newspaper bills, etc. The amount is not included in the pay, but\ncompensated after bills, of specific acceptable instances are provided by an\nemployee. <\/p>\n\n\n\n<ol start=\"7\">\n<li><h3><span class=\"ez-toc-section\" id=\"employer_provident_fundepf_or_provident_fund\"><\/span>Employer Provident Fund\/EPF or Provident Fund<span class=\"ez-toc-section-end\"><\/span><\/h3><\/li>\n<\/ol>\n\n\n\n<p>Provident fund is an accumulated investment\nwhich is contributed by both the employee and the employer every month, the total\namount of which is known as employee&#8217;s retirement benefits.<\/p>\n\n\n\n<p>Provident fund is mandatory for either of\nthe following instances:<br>\n<strong>Instance 1:<\/strong> Basic salary &lt; \u20b915000 p.m.<br>\n12% of the basic salary<\/p>\n\n\n\n<p><strong>Instance 2:<\/strong>\nBasic salary &gt; \u20b915000 p.m.<br>\nIn this case the organisation has the option to either contribute 12% of \u20b915,000 or 12% of basic.<\/p>\n\n\n\n<p>It is directly deposited in the PF account\nof the employee. It is mandatory for all government organisations.<\/p>\n\n\n\n<ol start=\"8\">\n<li><h3><span class=\"ez-toc-section\" id=\"public_provident_fund_or_ppf\"><\/span>Public Provident Fund or PPF<span class=\"ez-toc-section-end\"><\/span><\/h3><\/li>\n<\/ol>\n\n\n\n<p>Not to be confused with employer\u2019s PF\ncontribution, PPF is a voluntary contribution by an employee. The employer doesn\u2019t\nhave anything do with PPF.<\/p>\n\n\n\n<ol start=\"9\">\n<li><h3><span class=\"ez-toc-section\" id=\"gratuity\"><\/span>Gratuity<span class=\"ez-toc-section-end\"><\/span><\/h3><\/li>\n<\/ol>\n\n\n\n<p>Gratuity is the amount that an employee receives\nas appreciation for the cumulative service offered to him\/her upon leaving the\njob.<\/p>\n\n\n\n<p>Although gratuity is only paid after an\nindividual completes 5 years or more in an organisation and decides to leave,\nit is deducted every year.<\/p>\n\n\n\n<ol start=\"10\">\n<li><h3><span class=\"ez-toc-section\" id=\"insurance\"><\/span>Insurance<span class=\"ez-toc-section-end\"><\/span><\/h3><\/li>\n<\/ol>\n\n\n\n<p>Many organisations provide health, and life\ninsurance plans to the employees. Its premium is borne by the employer and is a\npart of CTC. Therefore, it is deducted when calculating the take-home salary.<\/p>\n\n\n\n<ol start=\"11\">\n<li><h3><span class=\"ez-toc-section\" id=\"income_tax\"><\/span>Income Tax<span class=\"ez-toc-section-end\"><\/span><\/h3><\/li>\n<\/ol>\n\n\n\n<p>The tax imposed on a professional\u2019s income is known income tax. Generally, employees get their salary after income tax have been deducted by the organisation. This is called Tax Deduction at Source (TDS). The deducted tax is paid to the government.<\/p>\n\n\n\n<ol start=\"12\">\n<li><h3><span class=\"ez-toc-section\" id=\"professional_tax\"><\/span>Professional Tax<span class=\"ez-toc-section-end\"><\/span><\/h3><\/li>\n<\/ol>\n\n\n\n<p>Professional tax is levied by state\ngovernments to let a professional practice a his\/her profession. The maximum\namount payable per year is \u20b92,500. It depends\non the employees monthly pay and the state in which they work in. Professional\ntax levied differs from one state to another.<\/p>\n\n\n\n<p>However, professional tax is not applicable\nin some states and UTs such as:<\/p>\n\n\n\n<p>Andaman &amp; Nicobar, Arunachal Pradesh, Chandigarh, Daman &amp; Diu, Delhi, Dadra &amp; Nagar Haveli, Goa, Himachal Pradesh, Haryana, Lakshadweep, Uttarakhand, Jammu &amp; Kashmir, Punjab, Nagaland, Rajasthan, and Uttar Pradesh.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-salary-breakup-calculator\"><span class=\"ez-toc-section\" id=\"what_is_salary_breakup_calculator\"><\/span>What Is Salary Breakup Calculator?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A salary breakup calculator is a tool that calculates your take home salary automatically. It is the total salary you will get after all the necessary deductions. The salary calculator consists of a formula box wherein you can enter your CTC and bonus included in your CTC.<\/p>\n\n\n\n<p>The CTC take home salary calculator will resolve all your worries around the salary. It will show you the deductions such as employer and employee provident fund, employee insurance, professional tax and the take home salary.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-does-salary-breakup-calculator-work\"><span class=\"ez-toc-section\" id=\"how_does_salary_breakup_calculator_work\"><\/span>How Does Salary Breakup Calculator Work?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>To <a href=\"https:\/\/cleartax.in\/s\/salary-calculator\" rel=\"nofollow\"><strong>calculate the take home salary using salary calculator<\/strong><\/a>, you must enter the CTC and the bonus, if any, in the formula box. The formula used to obtain Gross Salary is:<\/p>\n\n\n\n<p><strong>Gross Salary = CTC \u2013 Bonus<\/strong><\/p>\n\n\n\n<p>However, in order to land up at the total deductions in your salary, you need to deduct the yearly professional tax from your gross salary. Please note here that the professional tax amount varies from state to state.<\/p>\n\n\n\n<p>Further, the contribution of both the employer and employee towards the Employee Provident Fund (EPF) is deducted. EPF is calculated on your basic salary which translates to 12% of your base salary.<\/p>\n\n\n\n<p>In addition, if your basic salary is INR 15,000 or less, deduction of PF amount is mandatory. However, if it is above this limit, then the PF deduction is optional. The rules further vary from organization to organization.<\/p>\n\n\n\n<p>Here is a detailed demonstration of how you can calculate your take home salary. (Note: We have taken INR 15,000 as the base salary amount)<\/p>\n\n\n\n<p class=\"has-background\" style=\"background-color:#e8e8e8\">So, your <strong>Monthly EPF contribution<\/strong> = 12% of INR 15,000 = INR 1800<\/p>\n\n\n\n<p class=\"has-background\" style=\"background-color:#e6e6e6\"><strong>Yearly EPF Contribution<\/strong> = INR 1800 x 12 = INR 21,600<\/p>\n\n\n\n<p>In addition, employee insurance amount is also deducted.<\/p>\n\n\n\n<p class=\"has-background\" style=\"background-color:#e6e6e6\">Hence, <strong>Total Deductions<\/strong> = Professional tax + EPF (Employee Contribution) + EPF (Employer Contribution) + Employee Insurance.<\/p>\n\n\n\n<p class=\"has-background\" style=\"background-color:#e6e6e6\"><strong>Take Home Salary = Gross Pay \u2013 Total Deductions<\/strong><\/p>\n\n\n\n<p>Doing these calculations manually can be quite confusing. But, with the help of salary calculator, you can easily calculate your take home salary amount in a matter of seconds. Here is how you can use salary calculator.<\/p>\n\n\n\n<ul>\n<li>Enter your CTC amount and bonus as included in the CTC as a percentage or amount<\/li>\n\n\n\n<li>The salary calculator will then show you the total gross pay and performance bonus<\/li>\n\n\n\n<li>It also demonstrates the employer PF, employee PF, professional tax, the take home salary and employee insurance amount<\/li>\n<\/ul>\n\n\n\n<p><strong style=\"font-size:24px;\">What are the new rules for salary breakup in India?<\/strong><\/p>\n\n\n\n<p>The government is bringing out some changes in wage rule across the nation which will affect your basic salary and allowances. Set to be implemented from 1<sup>st<\/sup> July 2022, the new guidelines will cap the allowances to a maximum of 50% of your overall package. <\/p>\n\n\n\n<p>This rule will change the calculation of salary component in India. Employees as well as employer\u2019s contribution to the provident fund (PF) and ESIC would increase. Would this impact be positive or negative, we discuss below.<\/p>\n\n\n\n<p><strong style=\"font-size:24px;\">Impact\nof New Salary Structure Implemented in India<\/strong><\/p>\n\n\n\n<p>The standard salary structure has been rejigged in such a manner that your contribution to provident fund would substantially increase. This would be beneficial for you in the long run as PF income is non-taxable.<\/p>\n\n\n\n<p>But at the same time, your in-hand salary will take a hit as employer\u2019s contribution to PF would also increase which will then be balanced by reducing your in-hand salary.<\/p>\n\n\n\n<p><strong style=\"font-size:22px;\">Why Such a Change is Being Made to Salary Components In India?<\/strong><\/p>\n\n\n\n<p>The recent updates to salary breakup in\nIndia has got everyone talking. Officials have said that these changes in\nsalary components in India are being made to ease out different regulations for\nwages in India. <\/p>\n\n\n\n<p>A new salary structure in India would also result in private companies better treating their employees. Certain companies prefer keeping the percentage of basic pay lower to around 30-40% of the complete compensation while covering the remaining amount in other allowances. Now with these new guidelines, they would have to amplify this percentage. <\/p>\n\n\n\n<p>But some people have criticised this move to upgrade the standard salary structure in India. Both employer and employee diverting more money to PF would mean that the government would have more money at its disposal.<\/p>\n\n\n\n<p>According to critics, this money might be used to close in on the fiscal deposit. Whether or not these new rules of salary structure in India turn out the way they are being projected, only time can tell.<\/p>\n\n\n\n<p><strong>Conclusion: Understanding Salary Components<\/strong><\/p>\n\n\n\n<p>Once you understand all the salary components and the overall structure, you can check your payslip without assistance. However, some of these components such as professional tax is conditional, while TDS depends on the organisation.<\/p>\n\n\n\n<p>Hence it will be ideal if you first verify all the components with your payroll manager. You can also check for the <a href=\"https:\/\/www.techjockey.com\/blog\/top-10-payroll-software-for-growing-businesses\">payroll calculating software<\/a> to ease your work.<\/p>\n\n\n\n<p><strong>FAQs<\/strong><\/p>\n\n\n<div class=\"saswp-faq-block-section\"><ol style=\"list-style-type:none\"><li style=\"list-style-type: none\"><h5 class=\"saswp-faq-question-title\">What is CTC in salary?<\/h5><p class=\"saswp-faq-answer-text\">Cost to Company (CTC) is a term used for the direct compensation paid to an employee. It is calculated by including the total amount of direct and indirect costs (salary and additional benefit that the employee receives) associated with paying an employee in a year.<\/p><li style=\"list-style-type: none\"><h5 class=\"saswp-faq-question-title\">What is best salary base?<\/h5><p class=\"saswp-faq-answer-text\">Base salary or pay is the minimum initial compensation amount that an employee is guaranteed to make per year. Your base salary depends on numerous factors like work location, total years of experience in the industry, prevailing market rate and so on.<\/p><li style=\"list-style-type: none\"><h5 class=\"saswp-faq-question-title\">What is variable pay in CTC?<\/h5><p class=\"saswp-faq-answer-text\">A variable pay in CTC is basically employee compensation that is not fixed. It may includes commission, bonuses or incentives that an employee is eligible for. As this portion of compensation is determined by employee performance, it is also known as performance linked pay.<\/p><li style=\"list-style-type: none\"><h5 class=\"saswp-faq-question-title\">Why is take home salary different from CTC?<\/h5><p class=\"saswp-faq-answer-text\">CTC is the total of direct and indirect benefits. The take home salary, on the other hand, is the final amount after PF, TDS, and other deductions that are deposited in the employee\u2019s bank account.<\/p><li style=\"list-style-type: none\"><h5 class=\"saswp-faq-question-title\">How to calculate basic salary from CTC?<\/h5><p class=\"saswp-faq-answer-text\">Basic salary is the total pay given to an employee against his\/her performance. This does not include additional components like bonuses, benefits or compensation. The simple formula for calculating the basic salary is:<br><br><strong>Annual basic salary:<\/strong> Monthly basic salary x 12 months<br><br>However, the method may differ from company to company. Some of the other formulas used by companies are:<br><br><strong>Basic salary:<\/strong> Percentage of the CTC pay or gross pay<br><strong>Basic salary:<\/strong> Gross pay \u2013 total allowances (HRA, DA, etc.)<\/p><li style=\"list-style-type: none\"><h5 class=\"saswp-faq-question-title\">What is fixed salary?<\/h5><p class=\"saswp-faq-answer-text\">Fixed salary is the guaranteed amount that an employee earns monthly. This salary type is mentioned in the salary slip with allowances like DA, HRA, TA, etc. So, the fixed monthly salary includes basic monthly salary and fixed monthly allowances.<\/p><li style=\"list-style-type: none\"><h5 class=\"saswp-faq-question-title\">What are the types of salary structure?<\/h5><p class=\"saswp-faq-answer-text\">Types of salary structure depends on how you want to break up and define your CTC. The two main types of salary structures are:<br><strong>1. Top-down:<\/strong> In this type of salary structure, you mention the amount for different salary components and add up the total as gross amount.<br><strong>2. Bottom up:<\/strong> Unlike top-down, in this salary structure, you define the total gross and divide the amount between different components.<\/p><\/ul><\/div>\n\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"NewsArticle\",\n  \"mainEntityOfPage\": {\n    \"@type\": \"WebPage\",\n    \"@id\": \"https:\/\/www.techjockey.com\/blog\/new-salary-structure-in-india\"\n  },\n  \"headline\": \"Revised Salary Structure in India - All You Need to Know\",\n  \"description\": \"Understanding various components of latest salary structure in India helps in mitigating doubts & discrepancies that might arise due to lack of knowledge.\",\n  \"image\": [\n    \"https:\/\/cdn.techjockey.com\/blog\/wp-content\/uploads\/2019\/10\/Revised-Salary-Structure_feature.png\",\n    \"https:\/\/cdn.techjockey.com\/blog\/wp-content\/uploads\/2019\/10\/Salary-structure-in-India-FY-2020-21-1024x536.jpg\"\n  ],  \n  \"author\": {\n    \"@type\": \"Person\",\n    \"name\": \"Anurag Vats\"\n  },  \n  \"publisher\": {\n    \"@type\": \"Organization\",\n    \"name\": \"Techjockey\",\n    \"logo\": {\n      \"@type\": \"ImageObject\",\n      \"url\": \"https:\/\/cdn.techjockey.com\/blog\/wp-content\/uploads\/2019\/12\/logo.png\"\n    }\n  },\n  \"datePublished\": \"2019-10-24\",\n  \"dateModified\": \"2021-02-17\"\n}\n<\/script>\n","protected":false},"excerpt":{"rendered":"<p>Payroll calculation can be a complicated process if it isn\u2019t streamlined. While the payroll processes for calculating salary structure in India vary from one business to another, there are specific components that remain constant, such as standard deductions and taxes. Moreover, various laws specific to the location such as the Minimum Wages Act, Labour Welfare [&hellip;]<\/p>\n","protected":false},"author":50,"featured_media":33714,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7568],"tags":[7129,7127,7128,7126],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v22.2) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Revised Salary Structure in India - All You Need to Know for Pay Structure<\/title>\n<meta name=\"description\" content=\"Understanding various components of latest salary structure in India helps in mitigating doubts &amp; discrepancies that might arise due to lack of knowledge.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.techjockey.com\/blog\/wp-json\/wp\/v2\/posts\/11436\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Revised Salary Structure in India - All You Need to Know\" \/>\n<meta property=\"og:description\" content=\"Understanding various components of latest salary structure in India helps in mitigating doubts &amp; 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