What is the 50% Wage Rule?

Under the 2026 guidelines, Basic Salary must be at least 50% of the Gross Salary. This ensures higher social security (PF/Gratuity) contributions for employees.

How is TDS calculated here?

We use the New Tax Regime (2026) slabs. It includes a standard deduction of ₹75,000. Tax kicks in only if the total taxable income exceeds the rebate limit.

What is the difference between CTC and Gross Salary?

CTC (Cost to Company) includes every expense a company incurs for an employee (including employer PF and Gratuity). Gross Salary is the amount before taxes and employee deductions, excluding employer-side benefits.

Is ESIC mandatory for everyone?

No. ESIC is only applicable if the company has more than 10-20 employees (depending on the state) and the employee's Gross Salary is ₹21,000 or less per month.

What does “CTC-based salary structure” mean?

CTC (Cost to Company) represents the total monthly or annual cost incurred by the employer for an employee. It includes fixed salary, variable pay, and employer statutory contributions.

Is Gross Salary the same as CTC?

No. Gross Salary refers to the fixed cash compensation paid to the employee, while CTC includes Gross Salary plus variable pay and employer-side statutory costs such as PF and Gratuity.

Why does Employer PF show ₹1,800 even when Basic is higher?

As per the EPF Act, Provident Fund contributions are capped at a statutory wage ceiling of ₹15,000 per month. Therefore, 12% of ₹15,000 equals ₹1,800.

Difference between “₹15,000 PF Cap” and “Exact PF” modes?

The ₹15,000 PF Cap mode calculates PF only on the statutory wage ceiling. Exact PF mode calculates PF on the full Basic Salary.

Why is Variable Pay excluded from PF and Gratuity?

Variable pay is performance-linked and non-guaranteed. Statutory benefits usually apply only to fixed wages.

Is Variable Pay part of Gross Salary?

No. Gross Salary represents fixed monthly earnings. Variable Pay is shown separately as it is contingent on performance.

Why is Gratuity shown if it's not paid monthly?

Gratuity is accrued monthly for compliance and cost provisioning but is payable only after five years of continuous service.

Is Gratuity mandatory for all organizations?

Gratuity applies to organizations with ten or more employees. Many employers provision it in CTC to remain compliant.

Is PF mandatory for companies with < 20 employees?

PF registration is mandatory once an organization reaches 20 employees. Below this, it is optional.

Why does Gross Salary reduce when PF/Gratuity are applied?

This follows a CTC-bound approach, where employer statutory contributions are adjusted within the total CTC rather than added on top.

Does this structure include Income Tax (TDS)?

No. Income Tax depends on individual declarations and tax regime selection. It is calculated during payroll processing.

Is Professional Tax included in this calculation?

No. Professional Tax varies by state and is an employee-side deduction. It is excluded from this CTC tool.

Why is Basic Salary fixed at 50%?

Maintaining Basic at 50% of Gross is a best practice for statutory compliance and future labour code alignment.

Why is HRA calculated as 40% of Basic?

40% is the standard HRA structure for non-metro locations, balancing tax efficiency and consistency.

Can this structure be used in offer letters?

Yes. This structure is suitable for offer letters, HR annexures, and client billing discussions.

Is this calculator legally binding?

No. This is an indicative planning tool. Final payroll depends on company policy and prevailing laws.

Why is CTC preferred over take-home discussions?

CTC provides full cost transparency. Take-home pay can vary due to taxes and individual deductions.

Is this structure compliant with future labour codes?

Yes. The structure follows conservative wage definitions aligned with upcoming labour code principles.

Who should use this salary structure?

Startups, SMEs, IT firms, staffing companies, and EOR providers.

Who to contact for customization?

Consult your HR advisor or reach out to AnyWorks Studio for structured payroll support.