Wednesday, 25 February 2015

IDRA ACT 1951,

Growth of the industrial sector at a higher rate and on a sustained basis is a major determinant of a country's overall economic development. In this regard, the Government of India has issued industrial policies, from time to time, to facilitate and foster the growth of Indian industry and maintain its productivity and competitiveness in the world market.
In order to provide the Central Government with the means to implement its industrial policies, several legislations have been enacted and amended in response to the changing environment. The most important being the Industries (Development and Regulation) Act, 1951 (IDRA) which was enacted in pursuance of the Industrial Policy Resolution, 1948. The Act was formulated for the purpose of development and regulation of industries in India by the Central Government.
The main objectives of the Act is to empower the Government:- (i) to take necessary steps for the development of industries; (ii) to regulate the pattern and direction of industrial development; (iii) to control the activities, performance and results of industrial undertakings in the public interest. The Act applies to the 'Scheduled Industries' listed in the First Schedule of the Act. However, small scale industrial undertakings and ancillary units are exempted from the provisions of this Act.
The Act is administered by the Ministry of Industries & Commerce through its Department of Industrial Policy & Promotion (DIPP). The DIPP is responsible for formulation and implementation of promotional and developmental measures for growth of the industrial sector. It monitors the industrial growth and production, in general, and selected industrial sectors, such as cement, paper and pulp, leather, tyre and rubber, light electrical industries, consumer goods, consumer durables, light machine tools, light industrial machinery, light engineering industries etc., in particular. It is also responsible for facilitating and increasing the foreign direct investment (FDI) inflow into the country as well as for encouraging acquisition of technological capability in various sectors of the industry.
The various provisions of the Act are:-
  • Establishment of a 'Central Advisory Council' for the purpose of advising the Central Government on matters concerning the development of the industries, making of any rules and any other matter connected with the administration of the Act. Its members shall consist of representatives of the owners of industrial undertaking, employees, consumers, primary suppliers, etc.

  • Establishment of a 'Development Council' for the purpose of development of any scheduled industry or group of scheduled industries. This council shall consist of the members representing the interests of the owners, employees, consumers, etc. and persons having special knowledge of matters relating to the technical or other aspects of the industries.

  • The development council shall perform the following functions assigned to it by the Central Government:- (i) recommending targets for production, co-ordinating production programmes and reviewing progress from time to time. (ii) suggesting norms of efficiency with a view to eliminating waste, obtaining maximum production, improving quality and reducing costs. (iii) recommending measures for securing the fuller utilisation of the installed capacity and for improving the working of the industry, particularly of the less efficient units. (iv) promoting arrangements for better marketing and helping in the devising of a system of distribution and sale of the produce of the industry which would be satisfactory to the consumer. (v) promoting the training of persons engaged or proposing engagement in the industry and their education in technical or artistic subjects relevant thereto, etc.

  • The development council shall prepare and transmit to the Central Government and the advisory council a report (annually) setting out what has been done in the discharge of its functions during the financial year last completed. The report shall include a statement of the accounts of the development council for that year, together with a copy of any report made by the auditors on the accounts.

  • The IDRA empowers the Central Government to regulate the development of industries by means of licensing with suitable exemptions as decided by the Government. Accordingly, the entry into a business or the expansion of an existing business may be regulated by licensing. A licence is a written permission from the Government to an industrial undertaking to manufacture specified articles included in the Schedule to the Act. It contains particulars of the industrial undertaking, its location, the articles to be manufactured, its capacity on the basis of the maximum utilisation of plant and machinery, and other appropriate conditions which are enforceable under the Act.

  • If an application for licence is approved and further clearance ( such as that of foreign collaboration and capital goods import) are not involved and no other prior conditions have to be fulfilled, an industrial licence is issued to the applicant. In other cases, a letter of intent is issued, which conveys the intention of the Government to grant a licence subject to the fulfilment of certain conditions such as approval of foreign investment proposal, import of capital goods, etc.

  • The Government may order for investigation before the grant of licence to an industrial undertaking. It can make a full and complete investigation if it is of the opinion that in the respect of any schedule industry or undertaking, there has been or is likely to be:- (i) a substantial fall in the volume of output; or (ii) a marked deterioration in the quality of output or an unjustifiable rise in the price of the output. Also, if it is of the opinion that any industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to the public interest, it orders investigation.

  • As a result of such investigations, the Government is empowered to issue directions to the industrial undertaking for all or any of the following purposes:-
    • Regulating the production of output by the industrial undertaking and fixing the standards of production;

    • Requiring the industrial undertaking to take such steps as the Central Government may consider necessary to stimulate the development of the industry to which the undertaking relate.

    • Prohibiting the industrial undertaking from resorting to any act or practice which might reduce its production, capacity or economic value;

    • Controlling the prices, or regulating the distribution, of an output for securing its equitable distribution and availability at fair prices.

    • The Act also provides that any such directions may be issued by the Central Government at any time when a case relating to any industrial undertaking is under investigation. These directions shall have effect until they are varied or revoked by the Central Government.

  • The power of control entrusted to the Central Government under the Act extends to that of the take over of the management of the whole or any part of an industrial undertaking which fails to comply with any of the directions mentioned above. The Government can also take over the management of an undertaking which is being managed in a manner highly detrimental to the scheduled industry concerned or to the public interest. Further, the Central government can take over the management of industrial undertaking owned by a company under liquidation, with the permission of the High Court, if the Government is of the opinion that the running or restarting the operations of such an undertaking is necessary for the maintaining or increasing the production, supply or distribution in the public interest.
Until liberalisation, the industrial licence was required for the establishment of a new industrial undertaking, manufacturing of a new item by an existing undertaking, change of location of an industry, substantial expansion of existing capacity and for all other purposes. But the new industrial policy s liberalised this and exempted many industries from obtaining industrial licence. In today's scenario, only 6 categories of industries require industrial licensing under theIndustries (Development and Regulation) Act, 1951 (IDRA). Such industries file anIndustrial Entrepreneur Memoranda (IEM) with the Secretariat of Industrial Assistance (SIA),Department of Industrial Policy and Promotion to obtain an acknowledgement.

Tthe contract labour (regulation and abolition) act 1970

Tthe contract labour (regulation and abolition) act 1970 seeks to protect the interest of workers employed on contract. on the one hand, it seeks to provide contract workers minimum wages through licensing of contractors and by holding principal employers accountable for enforcement of the law. on the other hand, it empowers state and central governments to prohibit the conduct of certain kinds of work through contract labour. the concerned government can issue a notification in the official gazette to prohibit employment of contract labour in any process, operation or other work. the central government has abolished contract labour practices in a number of jobs in different industries and has issued 36 notifications so far in this regard. why is it proposed to be amended? once a type of occupation is determined to be outside the ambit of contract labour, two issues arise: one, the future of the workers who have so far been employed on contract; and two, the options before the principal employer for getting the work done. while the act does not make it mandatory for the principal employer to hire on a permanent basis all the workers who had been employed on contract before contract labour was abolished in that occupation, several court rulings have made such absorption of the contract labour mandatory. in particular, the 1996 supreme court ruling in the air india statutory corporation ltd and others vs united labour union and others case said that the principal employer has an obligation to absorb all contract labour who are retrenched as a result of issuance of a notification under section 10 (1) of the act prohibiting contract labour. the consequence of the act has been to restrict employment growth and depress productivity. the effect of other pieces of labour legislation such as the industrial disputes act has been to make it practically impossible for enterprises to shed labour once hired. when the contract labour act, as interpreted by the supreme court, makes it mandatory to hire hands who cannot be laid off subsequently even if economic conditions warrant such retrenchment, large enterprises find it risky to outsource various types of work to contractors. instead, they do the work in-house in a capital-intensive manner that reduces employment. in practice, the contract labour law covers only a small organised segment of the labour force. the cost of restricting employment growth and reducing productivity of capital more than outweighs the benefit to a small proportion of the workforce. hence the need to amend the law. what is the implication of the supreme court ruling on august 30 this year in the case of the steel authority of india? the constitution bench of the supreme court overruled, with prospective effect, the 1996 ruling in the air india case and declared that there is no automatic obligation on the principal employer to absorb all the contract labour working on its behalf, in the event of the government prohibiting the type of contract labour engaged by it. this spared sail the killing burden of absorbing close on 12,000 workers. sail is free to redeploy its existing workforce to carry out the work in which contract labour has been prohibited. the ruling would encourage other employers also to outsource more and more kinds of work, as the risk of having to absorb contract labour has disappeared. does this mean that the finance minister's promise in the budget to amend the contract labour act has become redundant? it has not. once a particular kind of activity has been barred for contract labour, such activity cannot be outsourced by an enterprise. this might not be much of a problem for a company with existing excess manpower but calls for fresh recruitment by a company that already runs a lean operation in terms of manpower. this restricts factor market flexibility, impedes efficiency and reduces employment. it is still necessary, therefore, to amend the law to facilitate outsourcing of activities without any restriction and to make appointments on contract. the finance minister should deliver on his budget promise to do away with differentiation between core and non-core activities and to protect the labour engaged in outsourced activities in terms of health, safety, welfare and social security.

The Contract Labour (Regulation & Abolition) Act ,1970

The Contract Labour (Regulation & Abolition) Act aims at regulating employment of contract labour so as to place it at par with labour employed directly, with regard to the working conditions and certain other benefits. Contract labour refers to the workers engaged by a contractor for the user enterprises. These workers are generally engaged in agricultural operations, plantation, construction industry, ports & docks, oil fields, factories, railways, shipping, airlines, road transport, etc.
The Act applies to every establishment/ contractor in which twenty or more workmen are employed or were employed on any day of the preceding twelve months as contract labour. Every establishment and contractor, to whom the Act applies, have to register themselves or obtain a license for execution of the contract work.
The interests of contract workers are protected in terms of wages, hours of work, welfare, health and social security. The amenities to be provided to contract labour include canteen, rest rooms, first aid facilities and other basic necessities at the work place like drinking water etc. The liability to ensure payment of wages and other benefits is primarily that of the contractor, and in case of default, that of the principal employer.
The Act is implemented both by the Centre and the State Governments. The Central Government has jurisdiction over establishments like railways, banks, mines etc. and the State Governments have jurisdiction over units located in that state. In the Central sphere, the Central Industrial Relations Machinery (CIRM)headed by Chief Labour Commissioner (Central) and his officers have been entrusted with the responsibility of enforcing the provisions of the Act and the rules made thereunder.

Apart from the regulatory measures provided under the Act for the benefit of the contract labour, the 'appropriate government' under the Act is authorised, as the case may be, to prohibit, by notification in the official gazette, employment of contract labour in any establishment in any process, operation or other work.

Tuesday, 24 February 2015

What is Gratuity?

After 5 years of working in the company an employee becomes eligible for Gratuity. This article explains what is Gratuity? How many years of service is considered to be eligible for Gratuity? How is Gratuity amount calculated? What is tax and Tax exemption on Gratuity? Difference between Gratuity and Pension.
What is Gratuity?
Gratuity is a lump sum payment made by employer  to the employee based on the duration of his  total service when the employee leaves the job .  The reason for leaving the job can be either by resignation, death, retirement or termination, etc. The amount you get as gratuity depends on the number of years you have served and the last drawn monthly salary. Roughly, you get half a month’s Basic and Dearness Allowance(DA) for every completed year of service.
Gratuity and the Law
Gratuity comes under the Payment of Gratuity Act. Most establishments including Charitable institutes, hospitals, educational institutes employing 10 or more workers are covered by the Act.Even employees not covered under the Payment of Gratuity Act are entitled to gratuity. The document (pdf) related to act is at
How many years of service is considered to be eligible for Gratuity?
Gratuity is payable only if an employee has been with the employer for five years or more. But this rule is waived if an employee dies or is disabled. In such cases, even if the tenure is less than 5 years gratuity is paid to the nominees or to the employee. After 5 years of service if you serve more than six months in the last year of employment, it is considered as a full year of service for calculation of gratuity amount. As per the judgement of the Supreme Court an employee is eligible for gratuity if he has completed 4 years of continuous service and 240 days continuous working in 5th year. (Ref lawyersclubIndia ). Since the gratuity is a statutory service condition,the Act provides for the punishment of the employer who fails to pay it to an employee.
  • To calculate number of years of employment, employee’s date of joining and date of leaving is considered and date of resignation is not taken into consideration.
  • Probation period is included while calculating eligibility for gratuity.
  • If you have worked for MNC and join the parent company as permanent employee in foreign location, you will no longer be employee of company registered in India and hence if you have completed 5 years in India office you will be eligible for gratuity.
  • If the company changes its name but management remains the same , there is no resignation from one company and joining of new company then years in both the companies will be counted.
When will the employee not get Gratuity even after completing minimum 5 years of service? The employer can forfeit gratuity even if employee has completed 5 years when the employee is fired for Disorderly  or  riotous conduct or any other act of violence  or moral offence during the course of his employment. A proper enquiry should be held and employee should have been found guilty and termination letter should mention that. Other than that even on being fired an employee is eligible for Gratuity.
How is Gratuity amount calculated?
Formula to calculate gratuity amount for a government employee/non government employee covered under the act is given below.  Your employer can choose to pay you more but the maximum amount of gratuity according to the Act cannot exceed Rs. 10 lakh. Amount paid more than the formula is something voluntary and not mandated according to law(called ex-gratia)
Gratuity  amount = (Number of years of service rounded off) * (Last drawn monthly Basic and DA) *15/26.
Ex: if an employee has served 20 years and in last year he drew monthly Basic and DA of Rs. 40,000 , he would get gratuity of Rs. 4,61,538 calculated as (20 * 40,000 *15/26). As mentioned earlier, If employee have served more than 5 years and in last year of employment he served more than 6 months then for gratuity calculation it is considered as a full year of service. For instance, if his tenure is 20 years and 7 months, the years of service for gratuity calculation will be rounded off to 21. But if he has served 20 years and 5 or 6 months, then the number of years of service will be considered as 20.
For an employee not covered under the Gratuity Act
Gratuity  amount = (Whole Number of completed years of service) * (Last drawn monthly Basic and DA) *15/30
Ex: if an employee has served in an organisation not covered under the act for 20  years and 7  months, then in calculation 7 months are ignored and only 20 years are used for calculation.  If in last year he drew monthly Basic and DA of Rs. 40,000 , he would get gratuity of Rs. 4,00,000 calculated as (20 * 40,000 *15/26).
How do companies plan to pay Gratuity amount? 
Some organisations set up a gratuity fund as a part of their financial planning. Some companies take the Gratuity schemes of insurance companies like  LIC’s,  Group Gratuity(Cash Accumulation) Scheme where the employer pays premium and gets tax rebate on the premium.
What about Tax on the Gratuity amount?
The gratuity received by an employee is NOT taxable if it is received on his retirement, his becoming incapacitated prior to retirement or if such gratuity is received by his widow, children or dependants on his death. So if one doesn’t retire and is below the retirement age then Gratuity is not tax free. Gratuity is taxed under the head Income from Salaries. Gratuity received by the legal heir is taxable under the head  Income from Other Sources. Some portion of gratuity received is exempt from tax as per Section 10(10) of the Income Tax Act which is explained below.
For a government employee the entire gratuity amount is exempt from tax.
For a non government employee covered under the Act or not covered by Act, he would get tax deduction for an amount which is the minimum of the following. Note that the ceiling of Rs. 10  lakh applies to the sum of all the gratuity received from one or more employers in the same or different years. Before May 24,,2010 limit was 3.5 lakh.
  1. Actual gratuity received
  2.  15 days Basic and DA for each completed year of service (according to calculations in the example above)
  3. Rs. 10 lakh
For example  after 20 years of service the employer paid gratuity of Rs. 5,00,000, gratuity amount by calculation is 4,61,538 to employee. Minimum of 5 lakh, 4,61,538 and 10 lakh is 4,61,538. The employee,non government will enjoy tax deduction on Rs 4,61,538 and Rs 38,462(5 lak h – 4,61,538) will be subject to tax.
What is difference between Gratuity and Pension?
Gratuity is an one time payment made to employees who have completed a 5 years of service in an organisation. Gratuity is the amount an employee may receive in gratitude for his services. Technically it is same as a TIP(TO INSURE PROMPTNESS), given to a waiter, taxi driver, or hairdresser .  Pension is the monthly payment made to retiring employees. Though most retiring employees get gratuity, pension is given only by some organisations, mostly government ones.
Is Gratuity part of CTC (Cost of Company)?
It’s a company discretion whether they want to make Gratuity part in employee’s CTC or not. The argument of not including Gratuity in CTC is that employee become eligible for gratuity only after completion of 5 years so how come company can make it part of employee CTC.  What if employee leave the company  before completing 5 years? But employer sees Gratuity as liability to pay in completion of 5 years employee and also  in case of death and disablement irrespective of completion of 5 years. So most of employers include Gratuity in CTC because they believe  Cost to the Company (CTC) is cash out go today + cash outgo in the future, which means, Basic + perquisites + Company’s contribution to your PF + today’s valuation of the gratuity element, especially when employer has taken insurance policy to cover gratuity liability. Our article Salary, Net Salary, Gross Salary, Cost to Company: What is the difference discusses CTC in detail.

Salary, Net Salary, Gross Salary, Cost to Company: Difference

Salary, Net Salary, Gross Salary, Cost to Company are they same or different. For most people it is plain confusion especially when one gets a new job. The excitement of getting first job is punctured on getting the first pay. It is usually less than what the fresher employee expected. Usually in the campus interviews company advertise their Cost to Company (or CTC) and people mistake their salary to be based on that (CTC/12). Educated but have No Financial Education is about the confusions of a new employee.  In this article we shall try to cover what makes the salary? What is the difference between Salary, Net Salary, Gross Salary, Cost to Company .

How people earn money?

The three broad ways in which people earn money are as follows:
  • Working for someone else or Employee ,
  • Working for themselves or Self Employed ,
  • and running a business.
When a person works for someone else or company, (s)he is then said to hold a job and is calledEmployee . The person or the company he or she works for is called Employer.  Money that is paid is called as Salary or Income or Wage.


As explained earlier Money that is received under Employer-Employee relationship is called as  Salary. If one is freelancer or are hired by an organization on contract basis, their income would not be treated as salary income.( In such case your income would be treated as income from business and profession).
Did you know that word salary has come from Latin salrium based on salrius which means pertaining to salt. The word appeared in 1350-1400. In those days, salt , regular ordinary table salt, was a prized and valuable commodity. It was money given to Roman soldiers to buy salt. The phrases  the salt of the earthor worth your salt refer to the high value of salt.
The salary consists of following parts.
Basic Salary: As the name suggests, this forms the very basis of salary. This is the core of salary, and many other components may be calculated based on this amount. It usually depends on one’s grade within the company’s salary structure.It  is a fixed part of one’s compensation structure.
Allowance: It is the amount received by an individual paid by his/her employer in addition to salary to meet some service requirements such as Dearness Allowance(DA), House Rent Allowance (HRA), Leave Travel Assistance(LTA) , Lunch Allowance, Conveyance Allowance , Children’s Education Allowance, City compensatory Allowance etc.  Allowance can be fully taxable, partly or non taxable. One can read Understanding the components of your salary and their taxation for more details.
Perquisite: Is any benefit or amenity granted or provided free of cost or at concessional rate such asRent free unfurnished house, Rent free furnished house, Motor car facility, Reimbursement of Gas, Electricity & Water, Club facility, Domestic Servant Facility, Interest Subsidy on Loan , Reimbursement of medical bills, Reimbursement of Hospital bills, Reimbursement of telephone bills, Benefits derived by employee stock option, and so on.
How are perquisites taxed?
Since these are non-cash components, they cannot be taxed directly. So the income tax laws attach a certain value to each of these components and charges a tax on them. The calculation of this value varies from category to category. Nevertheless, the thumb rule across all categories is that only those benefits that you use for personal purpose will be considered as perquisites.

Deductions: Two type of deduction are made from salary

  • Compulsory deduction such as Provident Fund, Income tax,Professional Tax (where applicable) .
  •  Optional deduction such as recovery for advance or loan if taken, voluntary contribution to P.F etc

Provident Fund Contribution

Provident fund contribution has two sides – the employer’s contribution and employee’s contributionThis is usually 12 per cent of the basic salary. However, this contribution is not paid out . It is directly deposited in Provident Fund(PF)  account and paid to employee when he retires or resigns.There is also employee’s contribution to PF. This amount  is deducted from his monthly salary and deposited in his PF account. For details on provident fund you can read Provident Fund (PF) and Voluntary Provident Fund (VPF)

Different types of salary

Gross Salary: is the amount of salary paid after adding all benefits and allowances and before deducting any tax.
Net Salary: is what is left of your salary after deductions have been made.
Take Home Salary: Is usually the Net Salary unless there are some personal deductions like loan or bond re-payments.
Cost to Company: Companies use the term “Cost to Company” to calculate the total cost to to employ . i.e. all the costs associated with an employment contract.  Major part of CTC comprises of compulsory deductibles. These include deductions for provident fund, medical insurance etc. They form a part of your compensation structure but you not get them as a part of in-hand salary. As such, although it increases your CTC, it does not increment your net salary.


Let’s see  an example explaining the salary. An arbitrary salary break up is given below (Note: salary structure varies from one company to another):
Component of Salary(per annum or p.a)Amount
Basic Salary480,000
Dearness Allowance 48,000
House Rent Allowance 96,000
Conveyance Allowance 12,000
Entertainment Allowance 12,000
Overtime Allowance 12,000
Medical Reimbursements 15,000
Gross Salary6,75,000
Benefits vary from company to company. Example of benefits for the above employee are:
Medical insurance2000
Provident Fund (12% of Basic)57,600 (12% of 4,80,000)
Total Benefits109600
Cost to Company=Gross Salary + Benefits6,75,000 + 109600=7,84,600
Benefits would also vary from company to company. In some Laptop may not be provided. In some cost of cubicle would be added. For example: If rent of office space is Rs 200 per sq ft and then a cubicle of 6 feet by 8 feet (i.e48 square feet) would cost Rs. 9,600 per month, or Rs. 1,15,200 per year. Which can be added to your CTC. Please note CTC varies from company to company. One can read Cost To Company or CTC salary: Understanding and Calculation for more details.
How tax affect the various components of salary
Component of Salary(per annum or p.a)AmountTaxTaxable Amount
Basic Salary480,000Full amount is taxable480,000
Dearness Allowance 48,000Depends on company policy. Mostly fully taxable. 48,000
House Rent Allowance 96,000Applicable if living in a rented house. Minimum of three amounts (Note:Calculation shown below)52,800
Conveyance Allowance 12,000Conveyance allowance of Rs 9,600 per annum is exempted from tax. If salary component is more than 9,600, the remaining part is taxable.In this case:12,000-9600=2400 2,400
Entertainment Allowance 12,000Depends on company policy. Mostly fully taxable.12,000
Overtime Allowance 12,000Fully taxable12,000
Medical Reimbursements 15,000If substantiated with bills, are exempt to a limit of Rs 15,000 annually        0
Gross Salary6,75,000Gross Taxable Salary6,07,200
HRA Calculation
The minimum of the three amounts will be exempt from tax:
a. Actual HRA allowance in the salary package, that is Rs 96,000
b. HRA received less 10 per cent of salary and DA, that is 43,200 (96,000 – 10% of 528,000)
c. If you live in metropolitan (Delhi, Chennai, Bombay and Calcutta), 50 per cent of salary and DA However, if you live in any other city, it is 40 per cent of salary + DA. So, in this case it would be Rs 2,11,200 (40% of 528,000)
So HRA will be minimum of ( 96,000; 43,200; 2,11,200) which is 43,200 which will be exempted.
So the portion that will be taxed in this example is = 96,000 – 43,200 = 52,800
As Gross Taxable Salary  6,07,200 falls in the highest tax bracket. This tax amount includes education cess too. Assumption: Employee does not make any tax saving investment. Tax based on Assement Year 2011-2012 : 57,103. For tax estimator Calculator of InvestmentYogi  is very helpful.
Employee PF contribution(12% of Basic)57,600
Professional Tax 2400
Total Deductions1,17,103
Net Salary = Gross Taxable Salary – Tax=6,07,200- 1,17,103=4,90,097
Net Monthly Salary=490097/12=40,841.41

Can Take Home salary be increased?

Yes it is possible and that too legally. An employee can plan taxes and increase the take home. If employee invests Rs 1, lakh in tax saving instruments, Section 80C such as PPF, Equity Linked Saving Scheme(ELSS) etc he can save taxes. So now employee in above example will be taxed on 6,07,200- 1,00,00 = 5,07,200.
Amount to be taxed5,07,200
Employee PF contribution(12% of Basic)57,600
Professional Tax 2400
Total Deductions93,413
Net Salary = Gross Taxable Salary – Tax=6,07,200- 93,413=5,13,787
Net Monthly Salary=513787/12=42,815.58
Tax saving instruments under section 80C, 80G, House loan etc are beautifully depicted in thisinfographicOptimum Salary Structure – Maximum In Hand Salary Or Minimum Tax Liability  explains how restructuring the salary would increase the take home


A paycheck is a document/record issued by an employer to an employee which shows how much money an employee have earned and how much tax or insurance etc. has been deducted. .It will typically detail the gross income and all taxes and any other deductions such as retirement plan or pension contributions, insurances, garnishments, or charitable contributions taken out of the gross amount to arrive at the final net amount of the pay.  One can read  format of payslip or see a sample here.

Form 16

If you are salaried employee in an organization, then you get the salary after deducting tax by the employer. This process is called as Tax Deduction at Source (TDS). Company must issue a Form 16 which contains the details about the salary earned by that employee and how much tax deducted.  The Tax deducted is paid to government by the company. Form 16 is the proof of employee’s income and tax paid to the govt. It is issued under section 203 of Income Tax Act for Tax.  Tax payer has to use the Form 16 to file the Income Tax return every financial year.  One can read Understand Your Form 16
Disclaimer: While efforts have been made to ensure the accuracy of the information provided in the content, the web site or the author shall not be held responsible for any loss caused to any person whatsoever who accesses or uses or is supplied with the content (consisting of articles and information).Do you know the biggest employers in the world. Wal-Mart , a chain of department stores across the globe, employs 2.1 million employees worldwide. The Indian State Railways which has 1.42 million employees, is largest employer in India.Ref: Salary Income Tax – Heads of Income: Salary Understanding CTC and Your Salary BreakupTax implications of salary componentsAll you wanted to know about CTC
 basics of earning such as How people earn money by working for someone else , How people earn money by starting their own business, Factors on which person’s income depends ,  Story on when we value money,Profit and Loss, Salaries of some famous Indian personalities, Salaries of some famous International personalities, Best jobs in the world, Worst jobs in the world
Hope we are able to explain the difference between Salary, Net Salary, Gross Salary, Cost to Company.  Did you find information useful? If you find some information missing or incorrect please let us know.

Why the Layoffs, Managing finances

My world turned topsy-turvy in just 20 minutes when I was given the pink slip. Even in my wildest dreams, I had not imagined I would be thrown out of my job… I did not know how to react. I looked around and found I was not the only one. Some of my sacked colleagues were reacting angrily, some were crying , some begging with the HR personnel to give them time  ,” said a techie with seven years of work experience. “What do I tell my family? How will I pay my car and housing loans? How will I get  another job”.  The article talks about changing face of IT industry, reactions of people on losing job,how to handle finances on losing job.
About the Layoffs
At least 15,000 techies have lost their jobs in Bengaluru in the 2014. The frequency of layoffs has increased. From IBM, Dell, Cisco, HP to TCS, almost all the big companies have cut jobs. TCS layoffs, made techies hit the streets to protest. TCS layoff caught employees and others in surprise, considering that TCS is known for job security. Employees were given no prior notice they were just asked to leave immediately with two months compensation as part of involuntary attrition.  Most of those who have been given pink slips are highly paid consultants and managers who were in managerial positions and were working on a project.  The case become more curious considering that TCS has plans of hiring 35,000+ freshers for 2014-15.  Talks going around have been that TCS  fired mid-level managers who are drawing fat packages and underperforming and replace them with low-cost freshers and train them. These software engineers are finding themselves in a logjam as they are finding it difficult to get past even job consultants as they carry the tag under-performer,forget landing jobs in other companies,
Why are companies doing layoffs?
As per Companies these lay-offs are part of the clean-up process, they are cutting jobs as part of market expansion and growth strategy which involves getting rid of redundant employee.  Every company does this every two to three years when they ask non-performing employees to leave. It’s not like 2008 . Although this is a common practice in most of the IT services companies, firing 25,000-30,000 employees is certainly not normal.
Is IT Landscape in World and India Changing?
World’s biggest IT companies are not shying away from firing employees. Questions that are being raised are How much dynamic and flexible is IT industry and how much job security can it provide? Shouldn’t companies provide training and motivation to assist their under-performing employees? Quoting Forbes  Layoffs In Tech Now A Permanent Feature
What becomes apparent when one takes all these individual company decisions together is that important sectors of tech, which were previously fonts of job growth, are no longer the gold rush that they once were. Yes, some companies are thriving, growing, and hiring. Apple and Samsung, the two biggest winners in high mobility, are stable. And Google, Facebook, Twitter, and others participating in the newer (and higher growth) markets, are doing fine.
Former Infosys human resources chief TV Mohandas Pai said in an interview says IT business models are changing
Economic growth can only come if there is a constant re-balancing of talent. People need to be productive and efficient to earn the money they are paid because the consumer ultimately pays for the inefficiency. Very often because of good times people get paid much more than they deserve for the value they create. Those who live by the sword should be prepared to die by the sword. If you want very high salaries, great perks then when times go bad or business shifts and you are not adding value you pay the price.
People do have good careers but will not have fast tracked promotions as earlier. The focus will be on higher skill and productivity.
There seems to be a malaise in the India IT industry. There’s talk of hiring and firing. Is this normal or is the industry shifting to a new business model?
This is a function of growth rates. The model is built on a pyramid at a particular angle. The ratio of developers to analyst to managers determines their efficiency and profitability. People get promoted very fast often at the cost of capability and maturity because of the fear of attrition. With growth rates down, in the teens, obviously the model needs to change. Many in the middle in the 10-15 year experience band would be redundant and very high cost. So what you see is an adjustment to lower growth and a rearrangement of the cost structure.
Also much of the so called high value work needing more experienced people has been down valued because of better process and automation. Today a senior developer often does the work of a junior consultant.
Pink slip is a something that many of us might face in future(I have personally faced it when my company got acquired). Kind of skills needed in the industry change with time. A decade ago needs for IT market were very different from the IT market today. Today there is high demand for jobs like data analysis, eCommerce which are high paying jobs (and high pressure too).  Layoffs is now part of every industry , especially one which is down. For example Nokia shut down it’s manufacturing factory in Chennai making 5000 people unemployed. With airlines criss airline staff got affected. In 2008 due to financial crisis people in financial industry were impacted.

 Reactions of Terminated Employees on being fired from movie Up in the Air.

I recently saw the movie Up in the Air  a 2009 movie starring George Clooney as Ryan Bingham based on 2001 novel of the same name, written by Walter Kirn. The story is centered on a corporate downsizer Ryan Bingham and his travels. Ryan makes his living by firing people, he travels to workplaces and informs workers of their dismissals in place of their employers, who fear doing it themselves. When he fires people some of their reactions are
  • I can’t afford to be unemployed. I have a house payment. I have children.
  •  I just… I guess you leave me dumbfounded. I don’t know where this is coming from. How am I supposed to go back as a man and explain this to my wife that I lost my job?
  • On a street level, I’ve heard that losing your job is like a death in the family. But personally, I feel more like the people I worked with were my family and *I* died.
  • This is what I get in return for 30 years of service for my company? And they send some yo-yo like you in here to try to tell me that I’m out of a job? They should be telling you *you’re* out of a job.
  • You have a lot of gall coming in here and firing your number one producer. And then you’re going to go home tomorrow and make more money than you’ve ever made in your life, and I’m going to go home without a pay check.
Hindi movie Bewakoofiyaan of 2014 featuring Ayushmann Khurrana, Sonam Kapoor and Rishi Kapoor is about  young people of today(shown as spendthrift, credit card-swiping generation) and repercussions of recession and unemployment of laid-off . (The movie was not good but the mainstream movie exploring the losing job concept was good)

Finances and Losing Job

While job security cannot be guaranteed today, a skilled or experienced worker can find another one. However, the interim period can be difficult if one does not plan one’s finances well. Losing  a job takes an emotional toll and you also have your finances to worry about. Some of the financial moves to help you tide over the period
Emergency Funds: Having an emergency fund that can take care of at least three to six months’ expenses can be of enormous help,
Budget and Bills: Make a survival budget to get a sense of how long your savings can keep you afloat. It would help you to tide you over when your finances are squeezed. A monthly budget has two components: fixed expenses and variable expenses some of which are necessary and some which are discretionary . Fixed  expenses include such as groceries, rent or maintenance bills, electricity bills, mobile bills and other utilities that you cannot avoid. While the lifestyle expenses would be weekend movies at multiplexes or restaurant . Look for expenses that can be cut out of your budge. It’s never wise to let bills go unpaid, but if you’re in a money crunch, make sure you know which ones to pay first. Prioritize your bills.
Manage Loans, Credit Card: Most households have debts, such as a home loan, personal loan, and credit card bills. Make sure that you pay your EMIs, especially for the home loan. If you are finding it difficult to pay the EMI, you have to explore the options : requesting your lender to restructure the debt or asking for deferment of loan payment or Switching the loan to another lender who offers lower interest rate. Credit card debt can prove very expensive if ignored, so pay at least the minimum amount due. You can also apply for a balance transfer to another bank’s credit card, which will reduce the minimum due amount.
Family Support: Losing your job is not a reflection on your worth as a person, or even on the quality of your work. At this juncture support of family is important.Talk about issues with your family and friends - don’t bottle things up. People think they can protect their children by not discussing finances around them, but a joint effort can yield great results. You can put it in terms they can understand — like instead of ordering out pizza three times a week, maybe you only do it once.”
Medical Emergencies: It is likely that your employer offered you and your family a medical cover. However, when you lose your job, the health insurance goes as well. This is the reason it is suggested that employees buy an independent cover besides the group cover from the employer.
Many have faced a job loss infact. Many successful people have lost their jobs, only to go on to better things.  But with Changing times one needs to understand that there would be layoffs and  take layoffs in stride, upgrade our skills and if worst comes to worst  be prepared for the worst. Look forward to hear from you How should one prepare for changing times where layoffs are part of picture? How should one manage finances on losing job?