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SKAG and Associates
Chartered Accountants

Salary Structure Builder

Compliant salary structure with 3 strategies — low, medium, high future liability.

The Salary Structure Builder prepares a salary structure for any CTC with reference to the Code on Wages 2019, EPF, ESI, gratuity and bonus laws. It compares three strategies side by side, shows Old vs New Regime tax, and lets you download an appointment letter. It is for employers, HR teams and startups designing pay structures.

Use the Salary Structure Builder

Tax Year 2026-27 follows the Income-tax Act, 2025 and Rules, 2026; FY 2025-26 the 1961 Act. Sets the children education allowance limit, the HRA 50% city list and the form and section names in the letter
Total Cost to Company per year
HRA exemption: 50% of salary in the listed cities, 40% elsewhere (Section 10(13A); Income-tax Rules, 2026 from Tax Year 2026-27)
Top-slab annual PT shown. Maharashtra, Karnataka, West Bengal and Telangana are worked out on the monthly salary slabs. Delhi, UP and Haryana have no PT
Determines statutory applicability of PF and ESI
Both employer and employee shares apply on actual Basic+DA if Yes

Generated on 16 October 2026 at skagandassociates.com — for information only, not professional advice

Build a salary structure for any CTC with reference to the Code on Wages 2019 (which replaced the Payment of Bonus Act) and the Code on Social Security 2020 (which replaced the EPF, ESI and Payment of Gratuity Acts; the EPF and ESI schemes continue), both in force from 21 November 2025. Compare three strategies side-by-side with full tax-friendly component breakdown, Old vs New Regime tax computation, and download a ready-to-use appointment letter.

Code on Wages 2019 effective: “Wages” = Basic + DA + Retaining Allowance, with a binding floor of 50% of total remuneration. If excluded components (HRA, allowances, bonus) exceed 50% of total remuneration, the excess is added back to wages for PF, gratuity and bonus calculations. All three strategies in this tool enforce this floor.

Three compliant strategies — side by side

All three satisfy the 50% wage-floor rule under Code on Wages 2019. Pick the one matching your cash-flow vs. retention philosophy.

Strategy comparison — pros, cons and downloads

Detailed advantages, trade-offs and one-click appointment letter for each structure.

Statutory references built into this tool

Code on Wages 2019

Binding wage floor: Basic + DA + Retaining Allowance ≥ 50% of total remuneration. Excluded allowances above 50% are added back to wages.

EPF (Code on Social Security 2020)

12% employee + 12% employer on Basic+DA. Wage ceiling ₹25,000/month from 17 September 2026 (₹15,000 earlier). EPS 8.33% of wages up to the ceiling. EDLI 0.50%. Admin 0.50% of EPF wages (minimum ₹500 per establishment).

ESI (Code on Social Security 2020)

0.75% employee + 3.25% employer on gross. Applicable only if monthly gross ≤ ₹21,000 and headcount ≥ 10.

Gratuity (Code on Social Security 2020)

15 days’ wages per completed year of service. Payable after 5 years of continuous service (1 year for fixed-term employees). Accrual: 4.81% of Basic+DA monthly. Cap ₹20 lakh (tax exemption limit for non-government employees).

Bonus (Code on Wages 2019)

Min 8.33% — max 20%. Applicable if wages ≤ ₹21,000/month. Calculated on wages up to ₹7,000/month or the applicable minimum wage, whichever is higher (this tool uses ₹7,000).

Income tax: FY 2025-26 and Tax Year 2026-27

HRA exemption u/s 10(13A). LTA u/s 10(5). Books, internet, meal u/s 10(14) / 17(2). Children education allowance: ₹100 a month per child (FY 2025-26); ₹3,000 a month per child, up to two, under the Income-tax Rules, 2026 (Tax Year 2026-27, old regime only). New Regime default; an employee choosing the Old Regime tells the employer and gives investment proofs in Form 12BB (Form 124 from Tax Year 2026-27). Salary TDS: Section 192 (Section 392 from Tax Year 2026-27).

Important note: This tool provides an indicative output only. It does not factor in every special provision, surcharge, exception, or recent notification. Verify with the firm before acting on any computation.

Frequently Asked Questions

What is the 50% wage rule under the Labour Codes?
Under the Code on Wages, 2019, wages mean basic pay plus DA plus retaining allowance. If excluded components such as HRA, other allowances and bonus exceed 50% of total remuneration, the excess is added back to wages when calculating PF, gratuity and bonus. In practice, this means basic plus DA should be at least half of total remuneration.
How does the salary structure builder work?
Choose the income-tax year (FY 2025-26 or Tax Year 2026-27), then enter annual CTC, city, state for professional tax, headcount and whether PF should be paid on full basic plus DA. The tool builds three structures, Low Liability, Balanced and High Retention, each keeping basic plus DA at or above 50%. It shows PF, ESI, gratuity and bonus costs, compares old and new regime tax, and can generate an appointment letter.
Does a higher basic salary increase PF and gratuity cost?
Yes. PF, gratuity and bonus are calculated on basic plus DA, so a higher basic increases the employer's cost for these items. PF is 12% each from employer and employee, limited to the Rs 25,000 wage ceiling (Rs 15,000 before 17 September 2026) unless higher contribution is chosen, and the tool accrues gratuity at 4.81% of basic plus DA each month, subject to the Rs 20 lakh cap.

Due in the next 30 days

Labour
  1. ESI Half-yearly Return of Contributions (Apr–Sep 2026)In 25 days · Labour
  2. PF deposit (ECR + challan) for OctoberIn 29 days · Labour
  3. ESI contribution for OctoberIn 29 days · Labour

Full compliance calendar → Statutory dates, which can be extended by notification. General information only.

Published by SKAG and Associates, Chartered Accountants, New Delhi · Proprietor CA Gaurav Singh (ICAI M.No. 539050). General information only, not professional advice.

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This website is intended solely for the dissemination of basic information regarding SKAG and Associates and is in compliance with the guidelines issued by the Institute of Chartered Accountants of India (ICAI). It is not intended to be a source of advertisement, solicitation or inducement of professional work. The information provided here is general in nature and should not be construed as professional advice. By using this website, the visitor acknowledges that there has been no advertisement, personal communication, solicitation or inducement of any sort whatsoever from the firm or any of its members.