Whenever I use to get my salary I use to wonder why my Basic pay is very low when compared with the CTC I get, Why is that so? Is there any specific reason for breaking up the salary into basic pay, allowances, fixed benefits plan and so on? Why they have to break up the salary? Instead they can give everything in hand at one shot?
Related Questions:
- What does the variable pay means in the total CTC of the annual pay given in the company?
- Calculation of basic salary from gross salary?
- Excel format for CTC salary break up?
- What does it mean by Gross pay in the salary pay slip?
- Why my salary is low in PB period when it was decided the increased amount?
- Instructions to calculate my CTC with the Gross salary?
- How to calculate the salary if an employee has work for 26 days on CTC basis?
- Does the increment takes place on total salary amount or on basic salary only?
- How is tax calculated for salary income? Is it calculated on Basic salary or total salary?
- How to calculate bonus on the salary of the employee? Is it calculated on the basic salary or total salary?
The reason for splitting your salary into different components is to make your salary tax-effective i.e. to reduce the income tax going to be imposed on your salary. All yours questions have the same answer mentioned. The different components that you get in your salary have their own role playing in your tax reductions. As you know, you will have different components in your salary like Basic, DA, HRA, Conveyance or transport allowance, Leave travel allowance etc. If we discuss briefly about each of these components, basic is the fixed salary that your company has fixed for your job role and it is completely taxable, DA is an allowance paid to you in order to compensate the price rise and it is totally taxable. HRA is the house rent allowance paid to you in order to compensate the house rent being paid by you and its tax-free if you are paying the rent. Transport allowance is paid in order to compensate your commute to office or during job and there is a fixed amount in this component which is tax-free, rest of the components like children education allowance and hostel expenditure, leave travel allowance etc are also tax-free upto some amount. Some other components in your salary are paid on the basis of performance of the company and they are also totally taxable. Because of all these reasons, the salary id divided into different components.
dear sir,
basic is less because every allownce are depended on basic.it is benifit for company.increment depend on basic salary if basic salary is more so increment and other allownce is increase.company looks it's benifit.
To get a fixed amount i.e pay is compiled with other neccessary counterparts which in turn culminates into CTC cost to company all the renumeration you will get are taxable but to live a good moderate life some addtional perks are given to bear the load of TAX which in turn leads to your savings from your salary.taxes are being cut according to taxable heads as per IT ACT OF GOI so your salary gets classified under various heads as reuired under IT LAW.
if you go through government point of you, you have to pay incomtax on your earning scale.
if company shows you are earning high, you have to pay more incomtax to government.
thats why for better paid to employee, employeers are braking your salary on different segment.
Companys are showing that you have being paid (basic pay) this much ammount (what ever you are getting in Basic) to the GOI. and It dept looks only for your basic pay and made your form 16 on that basis. so companys are giving Transport allowance means you are moving somewhere for company reason and all that things.. some of allowances are like HRA (you are living in Rental house) washing allowance, medical allowance etc.....
The basic salary is low compare to ctc coz ur pement is devided in many parts. Its a bunch of ur facilities given bye ur company. Company gvs u a pf,DA, medical claims to u & ur family, gvs travelling amt, so that kind of facility is give it to u bye company.on ur salary slip all this extra things & their cuttings r written separatly. So ur basic pement plus includin all ur facilities become bunch become ur ctc. The hole facilities releted charges give to u is fixed by company pay roll only ur basics get chenges time to time by giving u increments or appraisels. Thats why...
Total CTC is included of the various components in compensation package offered.Base Pay or the basic salary is one of the component in the CTC.Base pay or Basic pay is totally taxable but to reduce the tax implication,it is required for the employer to divide these components in various forms.Some of the components are HRA,TA,LTA,Medical etc but again some performance related pay-out such as incentive or bonus are entirely taxable and counted towards the YTD .
Thanks
HI,
It is less to CTC as it is divided in many other parts.
there are various other heads included in salary
Basic pay is less as compared to other heads of salary
If the basi pay is less it is benefit for the company as they get cost cutting benefit on it
lesser the basic pay higher the benefit for the company
Hai,
Generally the Basic pay will be less because to reduce the tax implication. Some of the companies will also provide extra payment in the form of Incentives.
To get more output/ result some of the companies are giving incentives. The incentives are not fixed but the basic payment is fixed. after 6 months or 1 year you can ask for salary increment. the incentives are depends on your monthly performance.
If your performance is good then you get basic payment with good incentives.
Always the basic pay of salary would be low as CTC is the cost to company means it includes many other facilities in it which is also a part of your salary but other facilities like PF, LTA, Medical, HRA etc used to deduct from the whole but indirectly you gain the profit of those facilities so apart from the salary other things are also required.
Re: Why basic pay of the salary is very low when compared with the total CTC? What is the reason behind it?
$$ HI $$
Check the following information :
$ CTC is nothing but cost to company $
$ The CTC involves HRA,PF,Medical and so on $
$ Generally the Basic pay is calculated between 35% to 40% of CTC and it also depends on the company policy $
$$ Thank you $$
The reason to divide your salary into different components is to make your salary tax-efficient ie, reduce the income will be required on your salary. All your questions have the same answer above. The different components that you have in your salary has its own role playing in your tax reductions. As you know, you have different components of your salary as Basic, DA, HRA, Conveyance or transport allowance, Leave travel allowance, etc.
If we talk briefly about each of these components, basic is the fixed salary that your company has a fixed for your job role and is completely taxable, DA is allowance paid to you to offset the price rise and it is totally taxable. HRA is the house rent allowance paid to you to compensate for the house rent to be paid by you and your tax-free if you pay the rent. Transport allowance paid to compensate for your commute to office or during work, and is a fixed amount in that component that is tax-free, rest of the components such as children education allowance and hotel expenses, leave travel allowance, etc. are also tax-free upto certain amount. Some other components of your salary is paid on the basis of performance of the company and they are also totally taxable. For all these reasons, the salary id divided into different components.
HELLO SIR.....
Some of the companies will also provide extra payment in the form of Incentives.
To get more output/ result some of the companies are giving incentives. The incentives are not fixed but the basic payment is fixed. after 6 months or 1 year you can ask for salary increment. the incentives are depends on your monthly performance.
If your performance is good then you get basic payment with good incentives.
ALL THE BEST.........
It is quite clear and obvious basic pay is related with da.if there is no pay fixation take place then basic pay value will be lessend year after year than suppose basic 5000/- da will be 150% da is compensation for prise rise(inflation) again if pay fixation take place timely basic pay will be 10000/- and da will be 50%.abovr system is followed by goi and psu on the basis of at par scale wise(equelly).
HELLO SIR.......
the Basic pay will be less because to reduce the tax implication. Some of the companies will also provide extra payment in the form of Incentives.
To get more output/ result some of the companies are giving incentives. The incentives are not fixed but the basic payment is fixed. after 6 months or 1 year you can ask for salary increment. the incentives are depends on your monthly performance.Total CTC is included of the various components in compensation package offered.Base Pay or the basic salary is one of the component in the CTC.Base pay or Basic pay is totally taxable but to reduce the tax implication,it is required for the employer to divide these components in various forms.Some of the components are HRA,TA,LTA,Medical etc but again some performance related pay-out such as incentive or bonus are entirely taxable and counted towards the YTD .
ALL THE BEST.......
Hi guest, It is one of the measure to reduce the tax burden on the employees by spillting into various allowance. Basic pay is always lower than the Cost to company (Ctc) because various allowance are included. Today saving of tax is very important and sometimes company even ask the employee to break up the salary according to their convinence. Basic pay is always taxable, but according to income tax, 1961, there are various allowances like house rent allowance, transport allowance are tax free upto a certain extent upon fulfilling certain conditions. Thanx
dear aspirants,
Because various tax payment thats why company
give very low salary in CTC according.You know
about tax payment every give so,your very low
based.And allowance are included in your salary
so your salary convinence according and basic tax
payable that why your CTC is low.
GOOD LUCK
Due the tax-effective the salary should splits into different components..Different components you will get in the salary is tax reductions..
Incuding components are Basic,HRA,DA,PF etc....Afetr completion of your jb duration they can give the money.....
Hello Friend,
generally basic is always less than than actual CTC and all other amount is given in different form
like
LTA
medical
PF
BONUS
...etc
some of these company pay along with salary and others you can claim once or twice in a year.
Thank You
Reply With Quote