How Can We Restructure Salaries to Help Employees Save More on Taxes Beyond 80C?

I need your help to redesign the salary structure to save the employees' tax. Recently, we are following the below salary structure. Please guide me if we can save the taxes of employees by adding or deleting any component or by increasing or decreasing any limit of certain components. (Here in our organization, the majority of employees would like to know other sources to save taxes apart from those which come under 80C).

Current Salary Structure

- BASIC (Gross * 25%)
- HRA (Gross * 15%)
- LTA (40,000 Rs/- Annually) per month 3333 Rs/-
- Conveyance (800 * 12) = 9600 Rs/-
- Medical Allowances (1250 * 12) = 25000 Rs/-
- Employee + Employer PF (6500 * 12%) / (6500 * 13.61%)
- TAX (200 * 12 / Feb 300 Rs) = 2500 Rs/-

Thank you and awaiting your response!

Suggestions for Salary Structure Enhancement

You can add the following to your salary structure:

• Education allowance - Rs. 100/- per child per month.

• HRA should be set at 50% of Basic.

• Allow PF contribution on the full Basic without any limit.

Regards

Increase Basic Salary for Tax Efficiency

Increase the basic salary to 50% of the gross salary so that more HRA can be considered for tax planning purposes.

Regards

You may add:

1. Telephone reimbursements
2. Medical reimbursements
3. Company-provided car
4. Club membership
5. Meal coupons
6. Uniform allowances
7. CEA
8. Magazine subscription
9. Car maintenance

Thank you.

I have a few queries on the same. I hope you won't mind explaining it.

1. Telephonic Reimbursement
As you have mentioned telephonic reimbursement, what would be the maximum limit for the same? And what about those employees who are using prepaid connections? Can we apply a fixed amount for everyone, or is it compulsory for them to submit their bills?

2. Medical Reimbursement
If I am not mistaken, this would apply to those employees who were on sick leave for a longer duration, say 3 days or more. They can submit their actual medical treatment bills, and we will reimburse it. Is that correct? Please correct me if I am wrong.

3. Company-Provided Car
We have the majority of employees who use their cars for office purposes. Is it possible for them to reimburse their petrol bills, or can we reimburse based on the distance from their house to the office? If yes, what would be the maximum limit, and how much should we reimburse per kilometer?

4. Club Membership
How does this work? What is the calculation or limit for that?

5. Meal Coupons
Again, we do not have any facility called meal coupons. Can we apply a fixed amount for all, e.g., Rs. 50 per meal?

6. Uniform Allowances, CEA, Magazine, Car Maintenance
Kindly elaborate on these terms briefly.

I would really appreciate your help, Aditya. Thank you in advance.

Regards,
Knowledge - HR

1. Medical Reimbursement vs. Medical Allowance

It should be termed Medical Reimbursement, not Medical Allowance. This is because an allowance per se is taxable in all cases, except those specifically exempted. For general medical reimbursement, Rs 15,000 is the maximum tax break that an individual can avail of against actual supporting documents.

2. Telephone Reimbursement

Telephone reimbursement provided to employees is not taxable. This is as per Rule 3(7)(ix). Telephone connection includes both landline and mobile connections. While there is no explicit reference to data card connection in Rule 3(7)(ix), some experts opine that a data card falls under the mobile phone category since a data card is just a SIM card.

- There is no explicit reference to the maximum number of connections allowed in the rule. Organizations typically allow one landline and one mobile connection under Telephone Reimbursement for each employee.
- The connections have to be in the name of the employee.
- Employees should submit telephone bills to their organization while seeking telephone reimbursement.
- Expenses incurred towards both prepaid and postpaid mobile connections are admissible for tax exemption.

3. Car Allowances

If the company provides you a car for personal and official purposes and reimburses the fuel, insurance, maintenance, and driver's salary, the taxable value shall be: in case the cubic capacity of the car is less than or equal to 1600cc – Rs 1,800 per month (plus Rs 900 for the driver) and in case the cubic capacity of the car is greater than 1600cc – Rs 2,400 per month (plus Rs 900 for the driver).

4. Free Meals

Free meals provided to you through paid vouchers, not transferable and usable only at eating joints to the extent of Rs 50 per meal, are safe.

5. Uniform Allowance

Uniform allowance is not considered as a Perquisite U/S. 10(14). This, however, needs to be a uniform, not a civil dress.

6. Asset Assistance

Asset assistance given by your employer, for example, provision of a computer or laptop owned by the company and provided to you or any member of your household, is not taxable in your hands.

7. Reimbursement of Club Membership Fees

The reimbursement of health club, sports club membership fees, and similar facilities provided uniformly to all employees would not be taxable in your hands.

8. Children's Education Allowance (CEA)

Children's Education Allowance (CEA) is exempt up to Rs 100 per month per child up to a maximum of two children. Also, Rs 300 per month per child up to two children is allowed if they are in a hostel.

Regards

There is an NPS option under Section 80CCD, which is tax-exempt up to 10% of basic + DA.

Regards,

For car allowances, you need to submit the details and the bills.

For meal coupons, you may receive 50 Rs per meal as a tax exemption if the employer is providing non-transferable coupons for working days.

If the company does not provide any meal coupons to employees and instead shows in the salary slip that the meal expense is (total number of working days * 50 INR), can the employee claim that?