How Can We Enhance Tax Savings for High Earners Without Changing Our Salary Structure?

Hi, we already have a couple of tax-saving components in our salary structure (up to 12% of basic) which includes reimbursements for book bills, mobile bills, driver's salary, LTA, and Sodexo coupons. There are upper limits for claiming each. Other salary components include basic (40% of monthly gross), HRA (50% of basic), medical reimbursement (Rs. 1250 per month), conveyance (Rs. 800 per month), and special allowance (remainder of monthly gross).

Employees with higher salaries are unable to take full advantage of tax savings since the choices are limited, and there are upper limits for claiming each. Can we add a few more components? If yes, what can they be? Can it be done while keeping the tax-saving component maximum up to 12% only and maintaining the overall salary structure as it is? Please advise.

Thanks.

There are a host of tax-saving components such as:

- LTA - (once in 2 years)
- Child Education Allowance - ₹2,400 p.a. (2 children)
- Child Hostel Allowance - ₹4,800 p.a. (2 children)
- Gift voucher - Max ₹5,000 p.a.

Regards,

What you quoted is absolutely correct. This can be claimed only in cases where the payments are made. Expenditure proof is required. Only paying an allowance, the incumbent cannot claim the rebate.

Regards,
Ramakant

Yes, Ramakant, all allowances need to be supported by proof for tax exemption. Pon

Further, it is the employer's responsibility during TDS calculation and final working at the year-end to confirm all the supporting documents that are claimed for deduction. In the absence of those supporting documents, the Employer/HR/Accounts authority should not consider those deductions, and differential TDS is required to be deducted. Please note, if the employer fails to do this and due to wrong information provided by the employee, if any TDS liabilities arise, it is the responsibility of the employer and not the employee. In such circumstances, the shortfall deduction of TDS, interest thereon for late payment, and any penalties are to be borne by the employer. Therefore, while finalizing the salary structures, especially concerning tax, HR personnel should provide clear and concise guidance to avoid further complications.

Regards,
Pramod Thakar
Pune