What allowances do employers commonly offer in India?
Salaries in India are broken down into multiple allowances (tax-exempt and non-exempt) and are based on percentages of different salary components. The Salary Structure includes the following basic requirements:
- Basic salary and Dearness Allowance (40% of Cost to Company)
- House Rent Allowance (40% of basic salary and Dearness Allowance)
- Leave Travel Allowance (Best practice is one month’s basic salary and Dearness Allowance)
- Employer Provident Fund (12% of basic salary and Dearness Allowance)
Cost to Company (CTC) can also include other allowances such as a professional pursuit allowance, vehicle maintenance, and a fuel allowance, which can be tax-exempt upon submission of receipts.
Although phone and internet are included in the CTC calculation, employers should still consider providing teleworking employees a phone and internet allowance. Phone and internet provided through CTC will receive the maximum tax benefit, but anything provided beyond this structure will be subject to taxation.
What should my company offer as a work-from-home (WFH) allowance in India?
There is no required work-from-home allowance in India. If you want to provide this allowance, the amount is up to your discretion.