How Can Consultancy Firms Optimize Salary Structures for Maximum Employee Tax Savings?

Dear All,

We are a consultancy. Can you suggest the best components that I can add to my salary structure to help my employees save tax to the maximum? The salaries in my company range from 2L to 6L per annum for junior to middle-level employees, and from 6L to 12L for senior-level employees.

Thanks,
Parul

Hi Parul,

The contents of the salary break-up may be as below; you can prepare it at your convenience. HRA would be 50 or 60% of basic.

- Basic
- HRA: 40-60% of Basic is exempted from taxes, depending on the class of the city.
- CCA: 825/- is exempted from tax.
- Other Allowances:
- Mobile Reimbursement
- Medical Reimbursement of 1250/month is exempted from tax.

Gross Per Month = Sum of all the above.
Gross Per Annum = 12 * Gross/Month.
PF Contribution = 12% of Basic/Annum.
ESI Contribution = 4.75% of Gross/Annum.
Medical = The mediclaim facility provided to employees who are not covered under ESI, as the maximum ceiling for ESI is 10000/Month. Anything exceeding this will be covered under Mediclaim or as per company policy.

Ex-Gratia/Bonus = A fixed amount as a bonus.
Annual Fixed Gross Cost = Gross/Annum + Ex-gratia.
Annual Total Cost = AFGC + PF + ESIC.
Annual total cost is also called as CTC.

Apart from this, Food coupons, LTA, and Furnishing items are included in their CTC.

I hope this helps clear up your queries to some extent.

Regards,

Amit Seth.

Hi Parul,

Amount reimbursement is also a part of taxable salary, but it is exempted from taxes up to a certain level. Are telephone bills, petrol, driver, and vehicle maintenance bill amounts completely tax-free? If not, then to what extent?

Telephone bills - 30,000/- per annum
Petrol - 72,000/- per annum
Driver salary - 60,000/- per annum
Vehicle maintenance - 25,000/- per annum

LTA
Books and periodicals - 25,000/- per annum

Hope this information is sufficient regarding the same.

Regards,
Amit Seth.