Salary Structure

vaibhavsinghal · 31-10-2009, 03:01 AM

Hi,
I was wondering why can't a company pay its employees the maximum amount through allowances (upto exemption limits, e.g. medical all. as 15000 p.a) so that its employees are liable to minimum income tax?

Thanks,
Vaibhav

aniltheblogger · 31-10-2009, 08:23 AM

that may look like company cheating the government and goodwill get affetcted

Avika · 31-10-2009, 09:50 AM

Dear Vaibhav,

It is a policy deicsion and a part of tax planning.

The management has to take the call and there is no restrcition on doing it. In fact it becomes tax friendly for the employees within the provisins of the law.

vrvittal · 02-11-2009, 08:30 AM

Well, the idea is fine.
Let us think about the Provident Fund. PF is calculated on the Basic Salary. It is a saving, plus the employer has also to contribute its share of PF. Considering this, we cant put all the salary amount into Allowances.

cksvasu · 03-11-2009, 10:13 AM

Dear Friend,

All allowances has its their own limits and any excess payment will result into taxable salary. For example, if you pay HRA 20,000/- to an employees whose basic is 10,000/-, then Rs 16,000/- (20,000 less 40% of 10,000/-) will become taxable salary. It doesn't have a sence in paying through allowances.

Even if you see the provisions of Income tax act, they were made very logically.

Regards