How Can I Create a Tax-Friendly Salary Break-Up for a 22 Lac CTC in Gurgaon?

Salary Break-Up

Hi Friends, I have recently joined a Gurgaon-based company as an executive in its HR Dept. I have been given an assignment of presenting a salary break-up of Rs 22 Lac per annum (CTC). I would highly appreciate it if someone helps me in suggesting the ideal break-up such that the employee has the lowest tax liability.

Thanks,
Ashwani

Salary Break-Up

Hi Ravi5554, as you mentioned 22 lakh per annum:

1. Try to give them basic and special allowance components as little as possible because both are fully taxable.
2. Include the HRA component because it is a highly tax-saving element in the salary structure.
3. Provide other components (such as company car, Sodexo, medical, telephone, meal allowances, uniform expenses).
4. Opt for using the company car instead of your own car as it is a significant tax prerequisite in taxation.
5. By investing under section 80(C) - up to 1 lakh, you can save on tax.
6. Consider section 80D for medical insurance.
7. Explore section 80G for donations.

In this way, you can save a significant portion of the tax amount.

Thanks, Mr. Aditya, for your inputs. Can you please create an ideal salary breakdown for me for a CTC of 22 lakh per annum? I would greatly appreciate it if you could do me this favor.

Regards,
Ashwani

You can also show the Helper Allowance. This is tax-free, subject to supporting documents.

Regards,
Ramakant

My question arises based on your answer. You mentioned that the Ex-Gratia amount should be added to the salary breakup, but since it is a fully taxable amount, what is the necessity of paying Ex-Gratia?

Helper allowances are taxable. If the helper is used for official purposes, then it is exempted.

Thank you.

Regards,
Ramakant

If you have already joined the company, then the salary breakup must have been given in your offer of appointment letter. The company might have offered you some options to change the components within the CTC. Please provide the salary breakup offered to you so that further advice may be given to you to save the income tax leviable upon you.

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Regards,

Clarifying Salary Components

The first thing that you have to clarify here is whether it is the CTC, Gross Salary, or Net Salary?

As you mentioned 22 lac per annum:

1. Try to give them basic and special allowances components as little as possible because both are fully taxable.
2. Include the HRA component as it is a highly tax-saving component in the salary structure.
3. Provide other components such as a company car, Sodexo, medical benefits, telephone allowance, meal allowances, and uniform expenses.
4. Using a company car instead of your own car is a significant tax advantage in taxation.
5. By investing under section 80(C) - up to 1 lac, you can save on taxes.
6. Consider section 80D for medical insurance.
7. Also, take into account section 80G for donations.

In this way, you can save a significant portion of the tax amount.