Navigating Salary Structure Changes and Tax Planning for FY 2019-2020: Your Questions Answered

Hi Everyone,

Salary Structure Changes for FY 2019-2020

1) Kindly advise on any changes applicable for the salary structure (salary components) based on Budget FY 2019-2020.

Rebate 87A Eligibility for Management Positions

2) Can we change the middle-level management and senior-level management positions to ensure that employees are eligible for the Rebate 87A of Rs. 12,500/- (Taxable Income below 5 Lakhs - Nil Tax)?

Fixed and Variable Salary Components Ratio

3) What is the ratio that needs to be followed for fixed and variable salary components? Is there any specific split?

Tax-Free Components for Tax Planning

4) What are the tax-free components in the salary portion for tax planning (from the employee's perspective)?

Thanks in advance.

Regards, Kesavan

**Location**: Chennai, India
salary structure, taxable income, salary components, tax planning, variable salary, Country-India, City-India-Chennai

Understanding Salary Structures and Tax Planning for FY 2019-2020

1) Regarding changes in the Salary Structure for Budget FY 2019-2020, it's essential to consider any updates in tax laws, allowances, and deductions that may impact the components of the salary. Ensure compliance with the latest regulations to optimize the salary structure effectively.

2) Adjusting the positions of middle-level and senior-level management to align with Rebate 87A requirements can be a strategic move. By structuring their salaries appropriately, employees can benefit from the tax rebate if their taxable income falls below the specified threshold.

3) The ratio between Fixed and Variable Salary components plays a crucial role in balancing stability and performance-based incentives. While there is no strict rule, a common practice is to maintain a reasonable split to motivate employees while ensuring a stable income stream. Consider industry standards and organizational goals when determining this ratio.

4) For tax planning purposes, incorporating tax-free components in the salary can help employees optimize their earnings. Some common tax-free components include:
- House Rent Allowance (HRA)
- Leave Travel Allowance (LTA)
- Medical Allowance
- Conveyance Allowance
- Children's Education Allowance

By structuring the salary with these components, employees can reduce their taxable income and maximize their take-home pay efficiently.

It's advisable to consult with tax experts or financial advisors to tailor the salary structure to individual needs while ensuring compliance with tax laws and regulations.