Income tax non fixed salary employees

Income tax calculation for other than fixed salary employees.

Employee is being paid by Hourly basis and payment is made once in a month. How to calculate income tax and how to generate payslip with deductions

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Hi @Yali

Irrespective of how and when we pay to employees - if the TDS calculations result in TDS deductions, you have to deduct the same and remit to IT Dept.

It could be for a month or a quarter etc.,

Similarly Form 16 for the same needs to generated and Form 24Q to be filed.

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Hi Dinesh

I am still looking for guidance on gratuity rules.

If Gratuity is been deducted from our CTC from day one, what will happen if we resign before 5 years of service.

What about the deducted gratuity amount that the employer has deducted per month from the CTC of an employee? Can he claim that amount in this case?

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Hi,

The Gratuity rules state that an employee is eligible for gratuity payments upon 2 conditions: a) after completion of 4 years and 300 days of continuous service in the organisation (b) Only upon cessation of service either by resignation or retirement or death of the employee.
However, it is the choice of the employer to make gratuity payments to employees even if Clause (a) above is not met. In other words, employer is not obligated to make the payments if the criteria (a) is not met but can still do so. Criteria (b) is mandatory though in all cases.
Regarding your second question, gratuity is not ‘deducted’ from CTC but a liability is created by the employer for any such future payments to an employee. An amount is set aside for future payments if the criteria are met.
Trust this helps. Regards, Vinod.

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Thanks for your revert.

But in my case company is deducting some amount under the gratuity component i.e 9-10k per month from the CTC offered to me.

In this case, we can’t claim the amount deducted from my own CTC.

As gratuity is what where there should be no contribution from the employee side from his salary, right?

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Please write to me separately @ vinod.gulvady@greytip.com as this topic has your personal data. Regards.

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There are two aspects. One is projecting Gratuity as part of CTC and the other one is Gratuity Payment. Both are governed as per the Payment of Gratuity Act & Rules.

Gratuity is a terminal benefit and hence it can not be considered as a deduction component in salary. However, CTC is not a defined term in any labor legislation and the CTC concept is only in Private sector employment. So it is not illegal to make Gratuity, part of CTC.

It is up to the employer to project the contribution towards Gratuity as a cost in CTC. If the employee is fine with that, he/she will accept the offer/appointment. As CTC has no relevance in any wage code, this is between employer and employee.

Now, coming to the second portion - Payment of Gratuity. As per The Payment of Gratuity Act, there are a few conditions to receive this terminal payment. However, the act is not against employers showing a lenient view towards the rules (For example, instead of the fulfillment of 5 years, employers if they wish, can pay on completion of 3 years as well). However here for better governance, the term has to be there in the appointment order. That is if Gratuity is shown as a component of CTC, the employer has to explicitly mention whether the company follows the Payment of Gratuity Act or a better policy for Gratuity payment (Company can not frame a payment policy, which less beneficial to the employee in comparison with payment of gratuity rules, as this can not stand when there is a dispute)

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the same we are following in our company, if it included in CTC we need to pay if he/she doesn’t complete 5 years also. CTC is the salary of the employee, then who has the right to hold the employee hard-earned money.

If it is not included in CTC follow gratuity rules.

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Hi,

If gratuity is part of CTC and if there is no specific mention in the appointment letter saying that it is as per Payment of Gratuity act, then it does not come under the purview of Payment of gratuity act.
It becomes part of your CTC and is payable as per company’s internal policy. If internal policy does not exist, then it has to be paid even if an employee works there even for a month.

In such cases the employer is obligated to pay Gratuity as stipulated under Payment of Gratuity act if eligible in addition to the above discussed amount to the employee .

Hi Dinesh

I am still looking for guidance on gratuity rules.

If Gratuity is been deducted from our CTC from day one, what will happen if we resign before 5 years of service.

What about the deducted gratuity amount that the employer has deducted per month from the CTC of an employee? Can he claim that amount in this case?


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Hi,

Please note Gratuity being a part of Total Cost to Company is absolutely fine and it should be in Benefits Section.

First, let’s clarify CTC.

CTC = Gross Salary + Benefits

Gross Salary - Monthly Fixed Salary payable to you

Net Salary = Gross Salary minus Statutory Deductions (PF, ESIC, PT, TDS, LWF) and (Loan & advance if any)

Benefits - Are not Monthly component, are paid as per the T&X’s of head for e.g. Bonus (Payable during Diwali) or Incentives (Payable Quarterly/half yearly/annualy, etc based on Performance), and so on.

What matters is:

  1. If this is deducted from your Gross Salary as mentioned by you - then company will have to Pay as Gratuity is not a deduction component and Employer cannot deduct the same & held the money of an Employee.

  2. If it is part of Benefits Section of CTC & if it clearly states Payment as per the Provision of Payment of Gratuity Act, then it is payable to you as per the Act only.

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