Understanding Indian Salary Structure

Indian salaries are structured differently from most countries. This guide explains how Omnivoo calculates each component of your salary from the annual CTC (Cost to Company).

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What Is CTC?

CTC (Cost to Company) is the total annual cost an employer spends on an employee. It includes:

• Direct salary paid to the employee
• Employer’s statutory contributions (PF, ESI)
• Gratuity provision
• Any other benefits

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CTC Breakdown

Here is how Omnivoo structures the salary for an employee with an annual CTC of ₹12,00,000 (₹12 lakh):

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Key Components Explained

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Basic Salary (50%+ of CTC)

Basic salary is the foundation of the salary structure. Omnivoo sets Basic at minimum 50% of CTC because:

• PF contributions are calculated on Basic
• Gratuity is calculated on Basic (Payment of Gratuity Act 1972)
• HRA tax exemption is linked to Basic
• A higher Basic means better retirement benefits for the employee

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HRA (House Rent Allowance)

HRA is a tax-advantaged allowance for employees paying rent:

• Metro cities (Delhi, Mumbai, Chennai, Kolkata): 50% of Basic
• Non-metro cities: 40% of Basic

Employees who pay rent can claim HRA exemption to reduce their taxable income under the old tax regime. See Investment Declarations for details.

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Special Allowance

Special Allowance is the balancing component that makes up the difference between CTC and all other components. It is fully taxable.

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Employer PF Contribution

The employer contributes 12% of Basic to the Provident Fund, split as:

• EPF (Employee Provident Fund): 3.67% of Basic
• EPS (Employee Pension Scheme): 8.33% of Basic (capped at ₹15,000 Basic)

This is capped at a Basic salary of ₹15,000/month for the EPS portion. See Provident Fund for full details.

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Employer ESI Contribution

If the employee’s gross monthly salary is ₹21,000 or less, the employer contributes 3.25% of gross salary to ESI. Most employees above this threshold are not ESI-eligible. See ESI Insurance.

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Gratuity

Omnivoo provisions 4.81% of Basic for gratuity, calculated as per the Payment of Gratuity Act 1972. Gratuity is payable when an employee completes 5 years of continuous service, or upon termination/death.

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Gross Salary vs Net Salary

• Gross salary = Basic + HRA + Special Allowance + other allowances (what appears on your payslip before deductions)
• Net salary (take-home) = Gross salary - Employee PF - Employee ESI - TDS - Professional Tax

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For Employers: Understanding Total Cost

Your monthly invoice from Omnivoo includes:

1. Employee CTC (prorated monthly)
2. Omnivoo EOR fee
3. Total payable = CTC + EOR fee

All statutory contributions are included in the CTC. There are no hidden costs.