This document defines and explains various components of salary and compensation packages in India. It discusses gross salary, net salary after deductions for taxes and other amounts. It also covers allowances such as dearness allowance, travelling allowance, and house rent allowance. Provident fund, gratuity, medical insurance are also summarized as mandatory or voluntary benefits provided to employees in addition to the basic salary structure.

1. SALARY
Prepared by
Aviram Jena
Copyright © 2008 - 2012
managementstudyguide.com. All rights
reserved.
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2. Contents
Gross Salary
Net Salary
Dearness Allowance(DA)
Travelling Allowance(TA)
House Rent Allowance(HRA)
Provident Fund(PF)
Gratuity
Insurance
Mediclaim
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3. Gross Salary
 Gross Salary is the total salary received on
MONTHLY BASIS

Key Definition
Gross salary = Salary before deductions
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4. Contents
Gross Salary
Net Salary
Dearness Allowance(DA)
Travelling Allowance(TA)
House Rent Allowance(HRA)
Provident Fund(PF)
Gratuity
Insurance
Mediclaim
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5. Net Salary
Net Salary
Net Salary is gross salary less the deductions which are
made on account of statutory compliances(like PF, Income
Tax, Professional Tax) and other dues (Like Loans and
Advances taken) which you owe to the Company and
Legal dues if any. It is something you get in hand and
commonly refer to as Take Home Pay.
Key Definition
Net Salary = Salary after deductions
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6. Let me explain with an example Let us say the employee earns the following per month:
• Basic Salary - INR 10000
House Rent Allowance - INR 5000
Convyeance Allowance - INR 1000
Magazine Allowance - INR 500
Education Allowance - INR 250
Then, GROSS SALARY - INR 16750
Deductions:
• Provident Fund - INR 1200
Income Tax - INR 750
Profession Tax - INR 130
Loan Deduction - INR 750
Total Deductions - INR 2830
• His Leave Travel Allowance - INR 10000 per
annum
Medical Reimbursement - INR 10000 per annum
Premium for mediclaim - INR 1500 per annum
PF- Management Contrib.-INR 16332 per annum
Then, CTC (Cost to Co.) - INR 2,38,832 per
annum.
Then, NETT SALARY - INR 13920
CTC = Monthly Gross Salary X 12 + Annual
benefits (INR 37832)
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7. Contents
Gross Salary
Net Salary
Dearness Allowance(DA)
Travelling Allowance(TA)
House Rent Allowance(HRA)
Provident Fund(PF)
Gratuity
Insurance
Mediclaim
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8. Dearness Allowance
Employees having fixed income suffer the
most due to rise in prices and to compensate
their loss, they are paid D.A. So D.A is nothing
but an addition salary and it is fully taxable.
Sometimes it is mentioned that :
1.
D.A enters into pay for service benefits.
2.
D.A enters into pay for retirement benefits.
3.
D.A is given under the terms of
employment.
4.
Dearness pay.
Thus, it is treated as part of salary for certain
purposes such as provident fund, value of
rent free
house, HRA, bonus, gratuity, leave
encashment
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9. Contents
Gross Salary
Net Salary
Dearness Allowance(DA)
Travelling Allowance(TA)
House Rent Allowance(HRA)
Provident Fund(PF)
Gratuity
Mediclaim
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10. Travelling Allowance
Any allowance granted to meet the cost of
travel on tour or on transfer by the employer
to his employee.
It is exempted upto actual expenditure
incurred for the purpose of employment.
Excess , if any, will be taxable.
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11. Contents
Gross Salary
Net Salary
Dearness Allowance(DA)
Travelling Allowance(TA)
House Rent Allowance(HRA)
Provident Fund(PF)
Gratuity
Mediclaim
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12. House Rent Allowance
Some times the employer does not provide
rent free accommodation but instead makes
a provision to pay some amount in cash, so
that the employee may be compensated to
some extent as far as rent is concerned. The
amount of cash paid is known as house rent
allowance.
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13. Contents
Gross Salary
Net Salary
Dearness Allowance(DA)
Travelling Allowance(TA)
House Rent Allowance(HRA)
Provident Fund(PF)
Gratuity
Mediclaim
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14. Provident Fund
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To encourage savings for the social security
of employees , the govt. has set up various
kinds of provident fund. The employee
contributes a fixed percentage of his salary
towards these funds and in many cases
employer also contributes. The whole
contribution along with interest is credited
to employee’s account. He will get
payment out of this fund at the time of
retirement and at some other important
occasions. If the employee dies , his heirs
will get the full payment.
Provident funds are of four types:
1. Statutory provident fund
2. Recognized provident fund
3. Unrecognized provident fund
4. Public provident fund

15. Contents
Gross Salary
Net Salary
Dearness Allowance(DA)
Travelling Allowance(TA)
House Rent Allowance(HRA)
Provident Fund(PF)
Gratuity
Mediclaim

16. Gratuity
Gratuity refers to a lump sum
amount payment made by an
employer to his employee at the
time of leaving job in appreciation
of his long and loyal services.
Earlier it was a voluntary
payment but now it has become a
sort of compulsory payment for
govt. employees, semi govt.
employee and all other
employees working in
banks, colleges, factories etc.
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17. Contents
Gross Salary
Net Salary
Dearness Allowance(DA)
Travelling Allowance(TA)
House Rent Allowance(HRA)
Provident Fund(PF)
Gratuity
Mediclaim
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18. MediClaim
Mediclaim Policy is an Insurance coverage wherein any of your Health
related hospitalization bills can be claimed from the insurance company.
There are two different ways to get your bills claimed either by cashless
facility i.e your bills are directly paid to the hospital or you can pay your bills
in the hospital and get an reimbursement after submission of the same to
the insurance company.
Mediclaim policy helps employee for take the benefit of medical
treatment. Employee’s come under it who pays amount to insurance
company
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