Flexi Compensation Structure Guidelines: FY (Band 4 & above)

Transcription

1 Flexi Compensation Structure Guidelines: FY (Band 4 & above) Introduction At Piramal Group, it is our constant endeavor to keep our compensation competitive with the industry and to enhance value for our employees. A flexible compensation structure enables employees to restructure a part of their compensation to best suit their needs, thus making it more tax-friendly by choosing components that are most relevant to them. We urge you to take advantage of this benefit and to do so you are requested to fill the details of the restructured compensation in Annexure 3 that is provided to you and submit it to your Business HR latest by 10 th June In case you do not want to change your compensation structure at this stage for the FY , you need not submit the annexure 3. In case of any queries, please contact your Business HR. The changes will be rolled out along with the salary of June/July 2017, however the changed structure will be applicable w.e.f. 1 st April 2017, subject to necessary conditions being met. Employees will not be allowed to change the structure again for the FY , unless the window is reopened and communicated to employees. The details in the following section will help you understand how to fill the Annexure 3, the various components, and the effect of each on your compensation: Filling the Annexure: Employee Details A. Employee Name: Please fill your name in this cell as it appears in the official records. Refer the increment letter to check. E.g. Mr. Amit Kumar, Mrs. Shefali Ganguly, Mr. S. Bhaskar. B. Employee ID: fill in your employee code/ number/ ID. E.g , , C. Band: Mention that band that you are in. Please refer to the increment letter in case you have been promoted, congratulations! Fill in the revised band as is mentioned in the letter. E.g. Band 1, Band 3, Band 5. D. Business: Name of your business. E.g. Pharma Solutions, Piramal Critical Care/ PCC, etc. E. Department: Name of the department in which you work. E.g. Finance, Supply Chain, Marketing. F. Location: Name of the Location/ Site that you are based out of. E.g. Ennore, Pithampur, Vikhroli. G. Fixed Pay: Mention your revised fixed pay for Refer to the increment letter to check the new fixed pay amount. Compensation Structure A. Basic: i. This is a mandatory component. Basic has been fixed at 40% of the Fixed Pay. This cannot be changed and is applicable to all employees irrespective of Band. ii. 100% of Basic pay will counted towards taxable salary and the tax will be applied as per the tax slabs defined by the latest Income Tax Act or any other relevant Act applicable at the time.

2 B. House Rent Allowance (HRA): i. House rent allowance is given to an employee to meet the expenditure incurred by the employee on account of rent of residential accommodation. ii. The amounts that an employee can choose under HRA is as follows: 1. Metro Cities Any amount from 0% to 50% of Basic 2. Non-Metro Cities - Any amount from 0% to 40% of Basic iii. For the purpose of calculating the exemption under HRA, Metro cities have been identified as: Delhi, Mumbai, Chennai and Kolkata. Rest of the cities will be considered as Non-Metro Cities. iv. It is an optional component. An employee may choose not to opt for this component and distribute this amount in other components of choice as per the maximum permissible limit. v. To avail tax exemption benefit under HRA, an employee will have to submit the relevant proof documents (e.g. a valid rent agreement, duly signed & stamped rent receipts, etc.) to the payroll team. vi. For an employee living in his/ her own accommodation, HRA is fully taxable. vii. It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than Rs. 1,00,000 p.a. viii. The lowest amount of the following is allowed as tax exemption under HRA: 1. In case of Metro Cities: 50% of Basic Pay and in case of Non-metro cities: 40% of Basic Pay 2. Actual HRA received by the employee for the duration for which he occupies the rental accommodation in a given financial year. Example: a. Employee gets Rs p.m. as HRA. b. Scenario 1: Employee stayed in a rental accommodation for all of 12 months in the financial year. Actual HRA received for exemption will be calculated as: 5000*12 = Rs. 60,000 c. Scenario 2: Employee stayed in a rental accommodation for only 7 months out of the 12 months of the financial year. Actual HRA received for exemption will be calculated as: 5000*7 = Rs. 35, Actual Rent Paid in excess of 10% of Basic ix. Example: Comparison of two employees who live in Mumbai, get the same basic and pay the same rent: Employee 1 Employee 2 Basic Pay 4,00,000 4,00,000 HRA % Opted for 50% 40% Actual HRA Received (A) 2,00,000 1,60,000 Actual Rent Paid (B) 2,40,000 2,40,000 Rent Paid in Excess of 10% of Basic 2,00,000 2,00,000 HRA Exemption Allowed (Minimum of A, B & C) 2,00,000 1,60,000

3 C. Company s contribution to Provident Fund (PF): i. This is a mandatory component. ii. Company s contribution to Provident Fund is fixed at 12% of Basic Pay. The amounts under this component cannot be changed. iii. Company s Contribution to PF is fully tax exempt upto 12% of Basic. iv. An equal amount will be deducted from your salary i.e. 12% of Basic will be deducted from your salary and deposited towards own contribution to Provident fund by employee. v. Employee s contribution to PF is also fully exempt up to 12% of Basic, subject to a maximum of Rs. 1,50,000 p.a. under section 80C. D. Health Coverage: i. This is a mandatory component. Employee cannot opt for an amount other than the amount mentioned in below: ii. Health coverage amount are as follows: a. Band 4 : Rs. 7,800 p.a. b. Band 5 & 6 : Rs. 11,400 p.a. c. Band 7 : Rs. 15,000 p.a. iii. These are nominal charges to employees in lieu of actual premium paid by the Company. Please refer the policy document for more details. iv. This is a fully tax exempt component. E. Education Allowance: ii. Employee can choose to opt for an amount from Rs. 0 4,800 p.a. under this component. iii. Rs. 1,200 p.a. per child is fully tax exempt under this component, upto a maximum of 2 children upto 20 years of age. In case of an employee who does not have any children, the amount under this component will be fully taxable. iv. Example: All employees have opted for Rs. 4,800 p.a. under this component a. Scenario 1: Employee with 2 children Tax Exemption = Rs. 1,200*2 = Rs. 2,400 b. Scenario 2: Employee with 1 child Tax Exemption = Rs. 1,200*1 = Rs. 1,200 c. Scenario 3: Employee with 3 children Tax Exemption = Rs. 1,200*2 = Rs. 2,400 d. Scenario 4: Employee with 0 children Tax Exemption = Rs. 1,200*0 = Rs. 0 F. Medical Reimbursement: i. This is an optional component; however, it is advised to avail full benefit under this component and opt for the full amount i.e. Rs. 15,000 p.a. ii. Employee can choose to opt for an amount from Rs. 0-15,000 p.a. under this component. iii. The amount under Medical Reimbursement is fully tax exempt to the extent of actual proofs submitted. iv. To avail full tax exemption under Medical Reimbursement, employees will need to submit actual medical bills to the finance department as and when requested for.

4 G. Leave Travel allowance: ii. Employee can choose to opt for an amount upto 2.5 times their one month s Basic. Employee may also choose not to opt for this component. In such a case, please mention 0 against LTA. Example: Basic Pay = Rs p.m.; Employee chooses to opt for 1.5 times monthly basic pay as LTA. LTA amount = 5000*1.5 = Rs. 7,500 p.a. This amount will be adjusted against Special Allowance. iii. As per Income Tax rules and Company policy, LTA is exempt to the tune of a. Travel by air: Actual amount spent on economy class airfare for the family to any destination in India, by the shortest route or Leave Travel allowance whichever is lower. b. Travel by train: Actual amount spent on A.C. first class rail fare for the family to any destination in India, by the shortest route or Leave Travel allowance whichever is lower. iv. LTA exemption can be claimed twice in a block of 4 calendar years. The current block is from 2014 to 2017 and next block is 2018 to v. As per Company Policy, to avail tax benefit under LTA, an employee needs to take atleast 5 days of Privilege Leave in the calendar year for which he/she is claiming LTA for. H. Learning Assistance Allowance: i. Learning Assistance Allowance has been introduced to provide an opportunity to employees based in India to enhance their knowledge and skill levels that are relevant for their current or future job roles by reimbursing the course fees as a part of the overall fixed pay. i iii. Subject to amount available in the special allowance, an employee can get a reimbursement towards learning assistance in any financial year as per the following table: Bands Maximum Amount (Rs. p.a.) Band 4 1,00,000 Band 5 & 6 2,50,000 iv. Employee will be entitled for tax exemption to the extent of actual expenditure on course fees and purchase of study material reimbursed by the Company provided that he/ she fulfills the criteria mentioned in the policy and submits relevant proofs as required. v. In case an employee does not fulfill the criteria as mentioned in this policy, he will not be eligible for claiming the reimbursement towards the learning. At the end of the financial year, the amount remaining as unclaimed reimbursement towards this allowance will be paid to the employee as special allowance and the applicable taxes will be deducted while paying the same to the employee as per the applicable Income Tax rules in India at the time of disbursement. vi. For detailed guidelines, please refer to Company s Policy document on Learning Assistance Allowance.

5 I. Superannuation/ National Pension Scheme (NPS): ii. Superannuation: a. This is applicable to only those employees who are currently covered under the scheme. Existing or new employees who are not already covered under this scheme cannot opt for Superannuation. b. Under Superannuation an employee can choose for an amount equivalent to 15% of his/her Basic or Rs. 1,00,000 whichever is lower. c. It is fully tax exempt to the extent of limits mentioned above. iii. National Pension Scheme (NPS): a. This component is applicable for employees who are already registered under the NPS scheme. Those who wish to opt for NPS, will need to register for NPS and the amount under this component will be effective from the date of their enrollment into the scheme. b. Employees can opt to participate in the NPS Scheme. The amount that they can contribute towards NPS is as follows: i. Minimum: Rs. 500 p.m. i.e. Rs. 6,000 p.a. ii. Maximum: 10% of Basic c. Contributions up to 10% of Basic is exempt from Income Tax under section 80CCD(2) of the Income Tax Act, J. Additional Car Lease Allowance: ii. This component is applicable for employees who are already part of the Company Car Lease scheme. Those who wish to opt for Car Lease allowance, will need to purchase the car as per the Company s Car Lease policy and the amount under this component will be effective from the date of their enrollment into the scheme. iii. Subject to amount available in the special allowance, an employee can choose to opt for a car with EMI over and above the amounts allowed as per Company s Car Lease Policy. This additional amount will be deducted from the special allowance of the employee. iv. The additional monthly EMI that an employee can opt for, for the Company leased-car, will be as per the table below: Bands Maximum Amount (Rs. p.a.) Band 4 Upto a max of Rs. 1,68,000 Band 5 Upto a max of Rs. 2,28,000 Band 6 Upto a max of Rs. 3,12,000 Band 7 Upto a max of Rs. 4,68,000 v. The additional EMI amount opted for (up to the limits mentioned above) will be fully tax exempt in the hands of the employees.

6 vi. In case of Car lease, perquisite value based on capacity of car (CC) is considered: a. In case where the capacity is less than 1600 cc, the perquisite value is considered at Rs.32,400 p.a. and b. Where this is more than 1600 cc, the perquisite value is considered at Rs. 39,600 p.a. This perquisite value is added to Taxable Income. vii. Employees with a self-own car or those who are not part of the Company s Car Lease Policy, should not opt for this component. K. Driver s Salary Allowance: ii. Subject to amount available in the special allowance, an employee can get a reimbursement towards salary paid to the driver in any financial year upto a maximum of Rs. 2,64,000 p.a. iii. The amount under this component is fully tax exempt: a. If employee has opted to participate under Company s Car Lease Policy and had opted for Driver s Salary allowance; b. And to the extent of actual expenses incurred and proof submitted thereof. iv. To avail the benefit of tax under this component, employee will need to submit relevant documents as required including receipts duly signed and stamped indicating the amount paid to the driver every month. v. In case of a self-owned car and uses it atleast partly for official purposes and employee chooses to opt for driver s salary, he will be eligible for Rs. 900 p.m. (or Rs. 10,800 p.a.) as tax exemption on account of driver s salary. L. Special Allowance: i. Special Allowance = Fixed Pay sum of the amounts chosen under all the above components ii. Any amount under Special Allowance is 100% taxable. iii. Please note, while the employee can arrive at a 0 under Special allowance if he/ she has exhausted all the money available, however, the sum of all the above components cannot exceed the Total Fixed Pay available. M. Total Fixed Pay: i. Total Fixed Pay is the sum of all components. Once you have opted for the amounts under each component in the annexure, do a sum total and put it against Total Fixed Pay. This should match your Total Fixed Pay for FY as is mentioned in your increment letter. ii. Please note: the sum of all the components cannot exceed the Total Fixed Pay available (i.e. the total fixed pay for FY that is mentioned in your increment letter). Acceptance: a. Employee s Signature: Please sign here before submitting the structure. This indicates that you have understood the changes that you have made and have made the changes on your own accord.

7 Please note, this annexure will not be accepted as valid and the changes will not reflect in your structure if you do not sign the form before submitting to your Business HR b. Business HR s Signature: Once you submit the annexure 3 to your Business HR, they will check the correctness of the data filled by you. In case of any changes to be made, they will contact you for the same. Post verification and changes made, if any, Business HR will sign the document and submit to the central HR Operations team for further processing. c. Date: Mention the date on which you are signing annexure 3. d. Place: Mention the place that you are at when you are signing annexure 3. E.g., Mumbai, Ahmedabad, Digwal, etc A few helpful tax provisions: a. An employee can avail of Tax exemption on account of investments and savings under Section 80C. The total tax exemption allowed under Section 80C, 80CCC and 80CCD(1) is upto a maximum of Rs. 1,50,000 p.a. In addition, to the above amount if an employee invests in NPS, he is eligible to get tax exemption under 80CCD (1B) on an additional Rs. 50,000 on account of NPS. In such a case, the total tax exemption allowed under Section 80C, 80CCC, 80CCD(1) and 80CCD(1B) is upto a maximum of Rs. 2,00,000 p.a. b. Employee can avail tax exemption on repayment of interest on Education loan taken for higher education from a university for self, Spouse and Children under section 80E. c. The Tax slabs applicable for are as follows: Income Slab Up to Rs. 2,50,000 Applicable Tax NIL Rs. 2,50,001 to 5,00,000 5% of amount by which the taxable income exceeds Rs. 2,50,000 Rs. 5,00,001 to 10,00,000 20% of amount by which the taxable income exceeds Rs. 5,00,000 Above Rs. 10,00,000 30% of amount by which the taxable income exceeds Rs. 10,00,000 i. Surcharge of 10% of income tax for employees whose total income is between Rs. 50 Lakhs and 1 Cr. ii. Surcharge of 15% of income tax, where total income exceeds Rs. 1 Cr. iii. Education 3% of the computed Tax + Surcharge as per above table Please note: a. Company has the right to amend or terminate its compensation programs in whole or in part at any time with or without prior notice to you. b. As per the applicable Income Tax Act or any relevant Act that may be applicable at the time of disbursement of salary, employees will bear any taxes that arise out of the changes made in the compensation structure.