Most of us do not understand that there is a big difference between CTC, gross salary and net salary in-hand.
Basic Salary: Basic salary is a fixed part of your compensation structure and the complete amount becomes a part of your in-hand salary.
Allowances: Apart from basic salary, there are some allowances your CTC will contain. Examples include HRA, conveyance allowance, leave travel allowance. Some of these allowances are tax free up to a certain limit and some of them are dependant on your actual spending.
Deductions: A major part of your CTC comprises compulsory deductibles. These include deductions for provident fund, medical insurance etc.
Allowance : HRA
Taxability :
40-50% of basic
Rent paid less 10% of basic salary
Allowance : Medical (allowance) reimbursement
Taxability : Exempt up to Rs 15,000 per annum
Allowance : Transport (conveyance) allowance
Taxability : Exempt up to Rs 1,600 per month
Allowance : LTA/LTC
Taxability : Actual travel cost can be claimed exempt under Section 10(5)
twice in a block of four years
Mobile/telephone reimbursement
Taxability : Exempt to the extent of actual expenditure towards the mobile and telephone expenses
Meal Coupons: Meal Coupons like Sodexo or Ticket are tax free subject to Rs 50 per meal.
Gift voucher: Gift Vouchers up to Rs 5,000 per year is exempted from tax
Transport Allowance: Transport Allowance up to Rs 1600 per month is tax free
PF Contributions
Employer’s contribution taxability: Exempt up to 12% of salary
Employee’s contribution taxability: Qualifies for tax deduction up to Rs 1.5 lakh u/s. 80C
No deductions for special allowance and telephone allowance