After appraisal in IT Sector, both employee and employer have lot more job to do. Employees will be seeking out new opportunity with higher package and employer will be busy in retaining and hiring.
Also we may look new salary structures. We must understand the basics of CTC also some tips on negotiating your CTC and maximising your cash in hand.
What is CTC all about?
In simple language, CTC is the total direct salary employee get from a company. Along with fixed compensation like basic salary, allowances and perks, it includes other variable components like bonuses and incentive-driven commissions. Also PF contribution done by your employer or compulsorily by you, also form a part of your CTC (for instance, your employer’s contribution or your contribution to your provident fund).
Your take home is the aggregate of all payable monetary components, minus deductions like social security contributions and taxes on income.
If you are looking for a new job or a salary hike, Its better well advised to think about how to maximise your cash in hand, after all the deductions and taxes will be borne by you. Otherwise, you might be carried away by the promise of a high CTC, but one that results in about the same cash in hand as your previous job.As a result, economically you might not be any better off.
However, with the new rules for personal taxation, this has become more challenging, but not impossible.The cumulative effect of the recent changes in personal taxation now puts a higher burden on the individual taxpayer. Previously, certain benefits that you received from your employer were taxed to your employer under the fringe benefit tax (FBT). For most of these items the tax rate was 6.79%, and your employer would pass on the economic cost of this to you — the employee.
Under these rules, all benefits given by employer that were previously taxable to the company under FBT will now be taxable in your hands, as perks according to your tax slab rate. This puts a higher burden on an employee, and will reduce the cash in hand, even though one’s CTC is not affected by it.
If employer offers a range of tax-efficient options as a part of the company’s salary structure, then we can maximise cash in hand. Every company will have its own range of options that they can offer, depending upon its internal accounting policies and interpretations of the tax code. Nevertheless, as employees we can ask for options that can help mitigate the impact of the recent changes to the tax law.
Friday, March 26, 2010
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