How Should We Handle Tax on Employer's PF Contribution and Leave Encashment in CTC?

Dear seniors,

In our organizations, we have the CTC concept where we include the Employers' contribution of PF in the CTC itself. Could you please let me know if we should deduct tax on PF Employers' contribution as well? Is leave encashment taxable? Please help us with the best tax-saving salary structure. I am attaching our current salary structure for reference.

Thanks & regards,
Silvy P. Thomas

Dear Silvy P. Thomas,

Please note, Employer contribution on PF is not taxable even if it is included as part of CTC, as indicated by you. Leave encashment is taxable upon resignation but is exempt from tax subject to a ceiling upon superannuation.

You have already considered Conveyance exemption Rs. 800/ month and Medical reimbursement Rs. 15,000/ annum. Additionally, you can extend 15% of basic salary towards superannuation contribution to LIC and LTA (subject to two claims in a block of four calendar years) which is exempt from tax. LTA is not taxable provided the employee undertakes the travel and produces bills to that effect. You can also extend Mediclaim coverage to the employee and his family.

Trust the matter is clarified.

M.V. KANNAN