Salary Structure Optimiser

The two objectives

1. Minimum tax. The optimiser builds two structures from the same CTC — one tuned for the new regime (default under the Income-tax Act, 2025) and one tuned for the old regime — and shows which leaves the employee with the lowest tax.

2. Labour Code compliance. Under the definition of "wages" in the Code on Wages, 2019 and the Code on Social Security, 2020, basic pay, DA and retaining allowance are wages. Listed exclusions (HRA, conveyance, statutory bonus, employer PF/pension contributions, overtime, commission, amenities, etc.) may not exceed 50% of total remuneration; any excess is added back to wages. Allowances not listed (e.g. special allowance, LTA) are treated as wages when paid universally.

How the optimal structure is built

• Wages are set at exactly the target share (default 50%) of total remuneration — the legal minimum — which keeps gratuity and PF cost as low as the law allows.
• Within wages, the whole amount is placed in Basic (plus LTA and children allowance for the old regime). A higher Basic increases the tax-free employer NPS limit and the HRA exemption.
• The excluded half is filled with employer PF, employer NPS, meal vouchers and HRA (up to 50% / 40% of Basic); any balance goes to conveyance allowance.
• Reimbursements, gift vouchers and output-linked variable pay sit outside remuneration.

Tax rules applied (Tax Year 2026-27)

• New regime slabs: 0–4L nil, 4–8L 5%, 8–12L 10%, 12–16L 15%, 16–20L 20%, 20–24L 25%, above 24L 30%; rebate up to ₹60,000 (income up to ₹12 lakh) with marginal relief; standard deduction ₹75,000; employer NPS deduction up to 14% of Basic + DA.
• Old regime slabs: 0–2.5L nil (3L for 60+, 5L for 80+), 2.5–5L 5%, 5–10L 20%, above 10L 30%; rebate up to ₹12,500 (income up to ₹5 lakh); standard deduction ₹50,000; HRA, LTA, children education (₹3,000/child/month) and hostel (₹9,000/child/month) exemptions; deductions for EPF + investments (₹1.5L), own NPS (₹50k), health insurance, home-loan interest (₹2L), professional tax; employer NPS up to 10% of Basic + DA.
• Both regimes: meal vouchers ₹200/meal, gifts up to ₹15,000/year, official phone/internet reimbursement; employer PF + NPS + superannuation above ₹7.5 lakh is taxable.
• Surcharge (10% / 15% / 25%, and 37% in the old regime above ₹5 crore) with marginal relief; 4% health & education cess.

Labour Code / social security assumptions

• EPF at 12% each on wages, restricted to the ₹25,000 ceiling when ticked. ESIC (3.25% + 0.75%) applies where monthly gross is ₹21,000 or less.
• Gratuity = 15/26 × monthly wages × years of service (cap ₹20 lakh). The employer impact estimate is undiscounted; an actuarial valuation (AS 15 / Ind AS 19) will differ.
• State Shops & Establishments rules, minimum wages, statutory bonus and professional tax slabs vary by state and are not modelled in full.

Disclaimer

This tool gives indicative estimates for planning and discussion only. It is not legal or tax advice. Exemptions depend on actual expenditure and documentation; State rules under the Labour Codes are still being notified and interpretations may change. Please consult us before implementing any structure.