India Payroll & Compensation Structuring Explained for International HR Leaders

Structuring Compliant Salary Packages in India

Compensation structuring in India involves distinct components dictated by statutory labor laws and tax regulations.

Core Components:

1. Basic Salary: Typically 40%–50% of Total CTC (Cost to Company).
2. House Rent Allowance (HRA): Up to 50% of basic pay in metro cities (50% tax exemption rules apply).
3. Employees Provident Fund (EPF): 12% matching contribution by employer and employee on capped basic.
4. Gratuity: Statutory retiral benefit payable after 5 years of continuous service.
5. Tax Deducted at Source (TDS): Income tax withheld at source based on new or old tax regime selection.