💰 Salary Structure Components
1. Basic Salary Components
Earnings
- Basic Salary (40-60% of CTC)
- House Rent Allowance (HRA)
- Dearness Allowance (DA)
- Conveyance Allowance
- Medical Allowance
- Special Allowance
- Performance Incentives
- Overtime (if applicable)
Deductions
- Provident Fund (PF)
- Employee State Insurance (ESI)
- Income Tax (TDS)
- Professional Tax
- Loan EMIs
- Advance Recovery
- Leave Deductions
- Other Deductions
📊 Statutory Compliance
2. Provident Fund (PF) Calculation
Applicability: Organizations with 20+ employees
Employee Contribution: 12% of Basic + DA
Employer Contribution: 12% of Basic + DA
Maximum Limit: ₹15,000 per month (for PF contribution)
Example Calculation:
Basic Salary: ₹25,000
DA: ₹5,000
PF Base: ₹15,000 (capped at ₹15,000)
Employee PF: ₹15,000 × 12% = ₹1,800
Employer PF: ₹15,000 × 12% = ₹1,800
3. Employee State Insurance (ESI)
Applicability: Employees earning up to ₹21,000 per month
Employee Contribution: 0.75% of gross salary
Employer Contribution: 3.25% of gross salary
Example Calculation:
Gross Salary: ₹18,000
Employee ESI: ₹18,000 × 0.75% = ₹135
Employer ESI: ₹18,000 × 3.25% = ₹585
4. Income Tax (TDS) Calculation
Annual Calculation:
• Calculate annual gross salary
• Deduct standard deduction (₹50,000)
• Deduct Section 80C investments (max ₹1,50,000)
• Deduct other allowable deductions
• Apply tax slabs
• Divide by 12 for monthly TDS
Tax Slabs (New Regime):
Up to ₹3,00,000: Nil
₹3,00,001 to ₹6,00,000: 5%
₹6,00,001 to ₹9,00,000: 10%
₹9,00,001 to ₹12,00,000: 15%
Above ₹12,00,000: 20%/30%
📅 Payroll Processing Calendar
| Activity |
Timeline |
Responsible |
| Attendance Compilation |
1st-3rd of month |
HR Department |
| Leave Reconciliation |
3rd-5th of month |
HR Department |
| Salary Processing |
5th-10th of month |
Payroll Team |
| Management Approval |
10th-12th of month |
Management |
| Salary Credit |
15th of month |
Accounts |
| Payslip Distribution |
15th-20th of month |
HR Department |
📋 Monthly Statutory Returns
5. PF Returns and Payments
- ECR (Electronic Challan cum Return): 15th of next month
- PF Payment: 15th of next month
- Form 5 (Annual Return): 30th April
- Form 3A (Annual Accounts): 30th April
6. ESI Returns and Payments
- Monthly ESI Contribution: 15th of next month
- Half-yearly Return: January & July
- Annual Return: 30th April
7. TDS Returns
- Form 24Q (Quarterly): 31st July, 31st Oct, 31st Jan, 31st May
- TDS Payment: 7th of next month
- Form 16 Issue: 15th June
📊 HRA Exemption Calculation
HRA Exemption is least of:
1. Actual HRA received
2. 50% of Basic (Metro) / 40% of Basic (Non-Metro)
3. Actual rent paid minus 10% of Basic
Example:
Basic: ₹30,000, HRA: ₹12,000, Rent: ₹15,000 (Metro)
Option 1: ₹12,000
Option 2: ₹30,000 × 50% = ₹15,000
Option 3: ₹15,000 - (₹30,000 × 10%) = ₹12,000
HRA Exemption: ₹12,000 (minimum of above)
⚠️ Common Compliance Issues
Frequent Mistakes to Avoid
- Incorrect PF calculation on allowances
- Wrong HRA exemption computation
- Late statutory payments leading to penalties
- Incorrect TDS computation
- Missing professional tax compliance
- Inadequate payroll documentation
✅ Best Practices
Recommended Practices
- Maintain detailed payroll registers
- Regular reconciliation of statutory dues
- Proper documentation of policy changes
- Employee communication on salary structure
- Regular payroll audits
- Backup and security of payroll data
- Training for payroll processing team