Resp. Seniors, Since last year, I have been working in a reputed auto component unit operating from NCR. In the hierarchy, I fall under middle management and head the unit HR department. Here, as per the salary structure, every penny of the salary component is considered for calculating TDS, as nothing is paid in reimbursement form through vouchers, etc., as it is being paid by other companies. Due to the above abnormality, a huge TDS is imposed on each white-collar employee every month. Can I request you to suggest a few salary components that do not attract TDS? Kindly guide. Regards,
From India, Pondicherry
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2From India, Pondicherry
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some tax saving components like HRA, Food coupons, Medical Assistance, Conveyance allowance, Gift vouchers, Child Edu allowance, etc are available. Pon
From India, Lucknow
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From India, Lucknow
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Tax-Saving Salary Components
There are some salary components that can be used to save tax for employees. Salary structure differs from organization to organization. Below are some components that are commonly used in industries:
1. **HRA** - A maximum of 50% of Basic can be exempted from tax on submission of rent receipts.
2. **Conv. Allowance** - ₹800 per month is exempted from tax.
3. **Telephone Reimbursement** - Part of the Flexible Basket. There is no upper limit prescribed by the government; however, there should be one firm policy, and the limits per month should be derived as per the employee's grade and designation. Fully exempted from tax on submission of bills. Note: All employees should declare that calls were purely made for official purposes only.
4. **Training Reimbursement** - Part of the Flexible Basket. There is no upper limit prescribed by the government; however, there should be one firm policy, and the limits per month should be derived as per the employee's grade and designation. As per government guidelines, the course or training shall be useful in company profit and growth. Training Reimbursement should not be exempted on periodic journals and the training courses that are a benefit to the employee only. Fully exempted from tax on submission of bills only if the training course is useful for company profit and growth.
5. **Sodexo Meal Coupons** - Part of the Flexible Basket. A maximum of ₹50 per meal is exempted from tax.
6. **Car Fuel** - Part of the Flexible Basket. Exempted from tax on submission of bills and depends on the CC of the car, Owner of the car (Employee or Employer), and purpose of travel. Car Fuel attracts perquisites, so it should be carefully implemented. An employee can only take either Conv Allowance or Car Fuel. Both cannot be availed at the same time.
7. **Driver Salary** - Part of the Flexible Basket. Exempted from tax on submission of bills and depends on the CC of the car, Owner of the car (Employee or Employer), and purpose of travel. Driver Salary attracts perquisites, so it should be carefully implemented. Employees availing Conv Allowance should not be allowed to take the benefit of Driver Salary exemption.
8. **Sodexo Gift Vouchers** - Part of the Flexible Basket. A maximum of ₹5000 per year is exempted from tax.
9. **Medical Reimbursement** - Part of the Flexible Basket. A maximum of ₹1250 per month is exempted from tax on submission of bills.
10. **LTA Reimbursement** - Part of the Flexible Basket. There is no upper limit prescribed by the government; however, there should be one firm policy, and the limits per month should be derived as per the employee's grade and designation. Fully exempted from tax on submission of bills (only twice in a four-year block).
Regards,
Kumar Anand
HR - SAMSUNG
From Korea
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There are some salary components that can be used to save tax for employees. Salary structure differs from organization to organization. Below are some components that are commonly used in industries:
1. **HRA** - A maximum of 50% of Basic can be exempted from tax on submission of rent receipts.
2. **Conv. Allowance** - ₹800 per month is exempted from tax.
3. **Telephone Reimbursement** - Part of the Flexible Basket. There is no upper limit prescribed by the government; however, there should be one firm policy, and the limits per month should be derived as per the employee's grade and designation. Fully exempted from tax on submission of bills. Note: All employees should declare that calls were purely made for official purposes only.
4. **Training Reimbursement** - Part of the Flexible Basket. There is no upper limit prescribed by the government; however, there should be one firm policy, and the limits per month should be derived as per the employee's grade and designation. As per government guidelines, the course or training shall be useful in company profit and growth. Training Reimbursement should not be exempted on periodic journals and the training courses that are a benefit to the employee only. Fully exempted from tax on submission of bills only if the training course is useful for company profit and growth.
5. **Sodexo Meal Coupons** - Part of the Flexible Basket. A maximum of ₹50 per meal is exempted from tax.
6. **Car Fuel** - Part of the Flexible Basket. Exempted from tax on submission of bills and depends on the CC of the car, Owner of the car (Employee or Employer), and purpose of travel. Car Fuel attracts perquisites, so it should be carefully implemented. An employee can only take either Conv Allowance or Car Fuel. Both cannot be availed at the same time.
7. **Driver Salary** - Part of the Flexible Basket. Exempted from tax on submission of bills and depends on the CC of the car, Owner of the car (Employee or Employer), and purpose of travel. Driver Salary attracts perquisites, so it should be carefully implemented. Employees availing Conv Allowance should not be allowed to take the benefit of Driver Salary exemption.
8. **Sodexo Gift Vouchers** - Part of the Flexible Basket. A maximum of ₹5000 per year is exempted from tax.
9. **Medical Reimbursement** - Part of the Flexible Basket. A maximum of ₹1250 per month is exempted from tax on submission of bills.
10. **LTA Reimbursement** - Part of the Flexible Basket. There is no upper limit prescribed by the government; however, there should be one firm policy, and the limits per month should be derived as per the employee's grade and designation. Fully exempted from tax on submission of bills (only twice in a four-year block).
Regards,
Kumar Anand
HR - SAMSUNG
From Korea
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Hi Kumar, thank you very much for providing such useful information. Can you please explain how to fix the salary computations regarding flexi benefits (Telephone Reimbursements, Conveyance Allowance, Training Allowance, Attire Allowance)? Our employees are concerned about TDS deductions from their salary. They have been requesting Flexi Benefits. Therefore, I would like to request your guidance on how to structure their salary in terms of Flexi Benefits.
Thank you.
From India, Hyderabad
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Thank you.
From India, Hyderabad
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Medical Reimbursement is part of the Flexible Basket. A maximum of Rs. 1,250 per month is exempted from tax on submission of bills.
Isn't it "a maximum of Rs. 15,000 per year"?
Thank you.
Regards
From India, Vadodara
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Isn't it "a maximum of Rs. 15,000 per year"?
Thank you.
Regards
From India, Vadodara
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Understanding CTC and Take-Home Salary
We all know the numbers on the CTC (Cost To Company), but the take-home pay is vastly different. This is mostly due to one single component: taxes. Taxes are applicable on most aspects of our salary. There are limited ways we can save on taxes by way of deductions. The most used sections under the IT Act, 1961 are 80C, 80D, 80G, and Sec 24.
Components to Reduce Tax Liability on Salary Income
- Allowances/Reimbursements: Allowances are normally paid irrespective of the employee actually incurring them. These are fully taxable if no bills are provided. However, if the expenses are actually incurred and bills are provided, they are not taxable up to a specified limit under each head.
- Conveyance: For conveyance, up to Rs.800 per month is allowed as a deduction without providing any bills.
- Medical Allowance: Bills have to be provided; up to Rs.15,000 per annum is allowed as a deduction. This can be claimed for self, spouse, children, parents, and siblings who are dependent on the assessee.
- Leave and Travel Allowance: Two trips in a block of four years are allowed, and only travel within India can be claimed as a deduction. Unfortunately, you won't be able to claim for those Myrtle Beach flights! It can be claimed for self, spouse, children, and parents, but only if the employee (assessee) is traveling along with them. There is no maximum limit on this, but the unutilized amount will be paid once the block is completed (after deducting taxes).
- Education Allowance: An amount of up to Rs.2,400 per annum is tax-free.
- Qualification Allowance: An amount of Rs.24,000 per annum is tax-free.
- Training Allowance: An amount of up to Rs.14,000 per annum is tax-free if the employee provides relevant bills.
- Telephone Allowance: An amount of Rs.12,000 per annum is tax-free if the phone is used for official purposes and bills are submitted.
- HRA: House Rent Allowance can be claimed if one lives in rented premises and the rent exceeds 10% of the salary.
The actual HRA exempted from tax is the least of the following:
- The actual amount of HRA received.
- 40% of salary. This increases to 50% if you are renting out the house in Delhi, Mumbai, Chennai, or Kolkata.
- Rent paid minus 10% of salary (basic component + dearness allowance).
Salary for the purpose of HRA means: Basic + D.A (only if it is forming part of salary for retirement benefits) + commission (if it's a fixed % of sales turnover).
All the best!
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From India, Vijayawada
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We all know the numbers on the CTC (Cost To Company), but the take-home pay is vastly different. This is mostly due to one single component: taxes. Taxes are applicable on most aspects of our salary. There are limited ways we can save on taxes by way of deductions. The most used sections under the IT Act, 1961 are 80C, 80D, 80G, and Sec 24.
Components to Reduce Tax Liability on Salary Income
- Allowances/Reimbursements: Allowances are normally paid irrespective of the employee actually incurring them. These are fully taxable if no bills are provided. However, if the expenses are actually incurred and bills are provided, they are not taxable up to a specified limit under each head.
- Conveyance: For conveyance, up to Rs.800 per month is allowed as a deduction without providing any bills.
- Medical Allowance: Bills have to be provided; up to Rs.15,000 per annum is allowed as a deduction. This can be claimed for self, spouse, children, parents, and siblings who are dependent on the assessee.
- Leave and Travel Allowance: Two trips in a block of four years are allowed, and only travel within India can be claimed as a deduction. Unfortunately, you won't be able to claim for those Myrtle Beach flights! It can be claimed for self, spouse, children, and parents, but only if the employee (assessee) is traveling along with them. There is no maximum limit on this, but the unutilized amount will be paid once the block is completed (after deducting taxes).
- Education Allowance: An amount of up to Rs.2,400 per annum is tax-free.
- Qualification Allowance: An amount of Rs.24,000 per annum is tax-free.
- Training Allowance: An amount of up to Rs.14,000 per annum is tax-free if the employee provides relevant bills.
- Telephone Allowance: An amount of Rs.12,000 per annum is tax-free if the phone is used for official purposes and bills are submitted.
- HRA: House Rent Allowance can be claimed if one lives in rented premises and the rent exceeds 10% of the salary.
The actual HRA exempted from tax is the least of the following:
- The actual amount of HRA received.
- 40% of salary. This increases to 50% if you are renting out the house in Delhi, Mumbai, Chennai, or Kolkata.
- Rent paid minus 10% of salary (basic component + dearness allowance).
Salary for the purpose of HRA means: Basic + D.A (only if it is forming part of salary for retirement benefits) + commission (if it's a fixed % of sales turnover).
All the best!
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From India, Vijayawada
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You can consider Uniform Allowance (without any bills required to claim) in the Salary Breakup as it is 100% exempted from TDS/Income Tax norms. You can check with your CA as well. All other benefits like Sodexo Passes are covered under FBT.
All the very best,
Satyam
From India, New Delhi
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All the very best,
Satyam
From India, New Delhi
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SORRY, BUT HERE IT IS CALCULATED DIFFERENTLY, I SUPPOSE. IT IS A PER ANNUM CEILING and NOT divided by 12 Per Month ceiling and that IS different NOT THE SAME
From India, Vadodara
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From India, Vadodara
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Yes, true, but CEILING and ELIGIBILITY are two different words. In my above post, I was talking about the eligibility part. The 1,250/- per month eligibility will be accrued to a value of 15,000/- per annum, and that is the maximum exemption (CEILING) in any FY.
In the case of carry forward of Medical Reimbursement, this eligibility gets added month-wise, but the CEILING of 15,000/- remains as it is.
Rgds,
Kumar Anand HR-SAMSUNG
From Korea
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In the case of carry forward of Medical Reimbursement, this eligibility gets added month-wise, but the CEILING of 15,000/- remains as it is.
Rgds,
Kumar Anand HR-SAMSUNG
From Korea
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1. FLOW CHART OF SALARY STRUCTURING AND GRADATION.xls
SALARY CALCULATOR & INCOME TAX.zip