CA Sandeep Kanoi

CA Sandeep KanoiWhat does, however, ‘salary’ include? Salary includes basic salary, bonus, wages, pension, fees, commission, gratuity, encashment of leave salary, advances and arrears, profits in lieu of salary, allowances and perquisites.  Salary income is taxable in the hands of an individual in the year of receipt or earning of salary income, whichever is earlier. Here are some of the safe components of your salary structure which can minimse your tax burden and help you plan your Salary Structure –

• If you live in a rented an accommodation and are entitled to a house rent allowance (HRA), the same is exempt to the extent of least of the following; 50 per cent of the basic salary, excess of rent paid over 10% of basic salary, actual HRA received. However, you cannot take benefit of HRA, if you live in a rent-free accommodation or live with your family or in your own house.  House Rent Allowance (HRA) taxability, working / calculation

• Provident Fund: Under Section 80C, provident fund contribution deducted from the employee’s account is exempted from tax up to an amount of Rs. 1 lakh or 12% of the employee’s salary. Taxability of Provident Fund -Recognized, Unrecognized & Statutory

Conveyance allowance for commuting between home and office is exempt up to Rs 800 per month. Budget 2015 has proposed to increase the exempt allowance limit to Rs. 1600/- per month.

Children’s Education Allowance 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 hostel.

• The value of any travel concession or assistance received by or due to you from your employer for yourself and your family in connection with proceeding on leave to any place in India subject to prescribed conditions.

Leave encashment while in service is taxable, but is exempt at retirement, subject to prescribed limits and conditions. If leave encashment is done on the termination of employment through superannuation, then it will be exempt from tax up to certain limits. Leave Salary encashment Exemption, Calculation, Download calculator

• An allowance to the extent actually incurred to meet the cost of travel on tour or on transfer, expenses incurred on conveyance in the performance of official duties, expenditure on helper engaged in the performance of duties, daily charges on account of absence from normal place of duty on tour are exempt.

Reimbursement of health insurance premium by your employer for you and your family is exempt.

• Actual expenditure incurred on your medical treatment or any of your dependents is exempt up to Rs 15,000 per annum as medical reimbursement subject to provision of bills. If you are paid a medical allowance instead of reimbursement, the same is fully taxable.

• In case you are entitled to a free or concessional company-provided accommodation, the same would be valued based on stipulated conditions.

• 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 1.6 litres – Rs 1,800 per month (plus Rs 900 for the driver) and in case the cubic capacity of the car is greater than 1.6 litres – Rs 2,400 per month (plus Rs 900 for the driver).

• In case you use your own car for official and personal purposes and the company reimburses the running and maintenance cost, the taxable value shall be: in case, the cubic capacity of the car is less than or equal to 1.6 litres – actual amount met or reimbursed by the employer less Rs 1,800 per month (plus Rs 900 for the driver) and in case the cubic capacity of the car is greater than 1.6 litres – actual amount met or reimbursed by the employer less Rs 2,400 per month (plus Rs 900 for the driver).

• The reimbursement of telephone expenses including a mobile phone actually incurred by you on behalf of your employer is not taxable in your hands.  Telephone facility received by Employee at his residence provided by employer is also not taxable in hand of employee as against Telephone Allowance.

• Dearness allowance to be added as a part of your retirement benefits as it will reduce your tax incidence with respect to HRA, provident fund, gratuity, etc.

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

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.

• Uniform Allowance – Uniform allowance is not considered as Perquisite U/s. 10(14). This however needs to be a uniform not a civil dress.

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.

Professional Tax: If a professional tax is being deducted from the employee’s salary, it can be reduced from the annual salary income to arrive at the taxable salary.

  Get pension or gratuity commuted to the maximum permissible limit up to which it is exempt from tax.

(Republished with Amendments)

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68 responses to “Must components in your Salary to minimise tax burden”

  1. vicky says:

    Hi Sir,
    I lost my Job but my wife is working, i have housing loan on my name and also the flat is in my name only. As i cant claim housing loan and get its tax benefit, at the same time can my wife claims HRA ? Since neither i personally claim HRA nor housing loan and get its tax benifit..as i take money from wife to repay the loan amount…in such scenario is it possible for my wife to claim HRA, as she cant claim loan because neither property is her name nor loan ?

  2. Suraj says:

    Sir I have a confusion in hra and rent free accommodation so plz tell me how it will be taxable

  3. venkat says:

    hi i want to sale my land its actual cost 10 lakh for black money i can sell it for Rs.15 lakh in andhra pradesh
    if any one want please mail me : kosuritax@gmail.com

  4. Pavan says:

    If one couldn’t declare the fuel expense in salary break-up with employer, and hence couldn’t take benefit of tax deduction at source (but was qualified to take tax benefits), is it still possible to deduct Rs 1600*12 from B1 (Income from Salary) component while filing ITR??

  5. Rahul Chitte says:

    Hello,

    Can an employee only take either Conveyance Allowance or Car Fuel. Both can not be availed at same time. Is this true as 2016-17 IT rules ?

    Please help.

    Regards

    Rahul Chitte

    • Deepak Seth says:

      Yes, it’s right…you can avail benefit only from one source…either Conveyance OR Fuel Reimbursement.

  6. Atul Tyagi says:

    1596 is less than 1600 so it falls under <1.6 lt..

  7. Suman says:

    Yes you can if you have the bills

  8. Sumanta says:

    It is same as 1.6lt or 1600 cc

  9. KumarStone says:

    Hi,

    I have a fiber optic cable internet connection (Broadband), this connection is with out a telephone number, there is only customer number. My employer is not accepting the bills as the broad band connection does not have a telephone number. Can you please through some light on this as there are many who have such issue and there is no information on the web. I want to save some money and dont want tax to be computed on the allowance that i get from the company.

    Regards
    Kumar

  10. Surbhi says:

    Dear Sir,
    I have recently joined a organisation and the company offering me fuel reimbursement of rs 2000 pm for distances traveled between home to office and back but i do not own a car .
    can i claim the reimbursement without owning a car.

    • Deepak Seth says:

      No, you can claim fuel reimbursement if you own Two OR Four Wheeler…Tax exemption are different in both scenarios.

  11. Abhinav says:

    I have a Fiat Palio which is 1.6lt engine, but as per RC and manufacturer, the actual engine capacity is 1596cc and not 1600. Which bracket does it fall under? <1.6lt or >=1.6lt.

  12. shankar says:

    Dear Sir,

    I have recently joined a organisation and the company offering me fuel reimbursement of rs 10000 pm for distances traveled between home to office and back but i do not own a car .

    can i claim the reimbursement without owning a car.
    or could this amount be clubbed to any other component of my salary so that net income payable to me does not get impacted.

  13. chirag says:

    My company is not providing any telephone reimbursement(Allowance) in my Salary Break Up sheet

    Can I still claim my telephone Allowances while filing returns ..?

  14. Amith Kumar says:

    Can Broadband/Internet bills also be produced for exemption?

  15. Nishit Saiya says:

    Dear Sir,

    An Employing enjoying car facility from the company and also availing Transport Allowance as a component of salary can claim deduction of Rs. 800/1600 whatever p.m. ?
    There is no doubt that he will be taxed for Car Facility @ Rs. 1600/2400 p.m.; but, can he be entitled to the benefit of Rs. 800/1600 p.m. of Transport Allowance ?

    Regards,

    Nishit Saiya

  16. jayaraj says:

    Hi ,

    i am getting salary 7.15laks , my tds is too high how to reduce and what are all supporting documents i need to submit plz help me

  17. rohit sadaka says:

    Hi

    For purpose of fuel reimbursement is it compulsory to have car in own name or we can claim if car is in spouse’s name.

  18. Girish says:

    Hi, Whether i can claim previous years medical expenses. i.e., year 2013.
    can anybody suggest me.

  19. Rajesh says:

    can i submit internet as well as telephone bill for get exemption in telephone reimbursement in salary

  20. manish kumar says:

    I got medical reimbursement on my treatment was 1.75lac.my salary is 5.30lac gross per annum.after pf 50000 deduction my salary 4.80 lac per year.auditor say above 5lac it will be 20%. or it will be 10% tax on my medical.please tell me urgently.help me.

  21. Giby says:

    Dear Sir,

    I recently got a job offer from a US based company, and this company is not registered in India hence they have offered me a flat salary of 1.10 lac per month. There is no break up in the salary component (like: HRA,PF,DA etc). Please let me know how can i plan for saving my tax.

    Regards,
    Giby

  22. goshan says:

    Dear Sir,

    I am goshan from chennai, I have a question. My uncle business is fully cash oriented business , daily he will sale x amount of products and earning y amount of cash. the earning cash is very high per day for last 10 years. He is having cash black and he wants to use me. i am salaried account of rs.40000/ month. he is presssuring me dont put insurance, i will get you tax refund by using auditor techninques. without my knowledge he is putting 6 lakhs in my account as FD which is not my money. I am not interested and always asking signature in it forms. sir, please tell me how can i avoid this and what should i do. the point is he is able to give me refund from IT office. I enjoyed that money also. but personally i am not intersted and i want to avoid this, because i dont have knowledge about this. please help.

  23. Sachin Ghanwat says:

    Hello Team,

    Previously my company use to give tax benefit on Car Maintenance/Petrol and Drivers Salary but since 1st April 215 they sent us guidelines saying personal car used for official travel from home to office will have limit of 1800 (+900) on Car maintenance and Driver Salary for engine < 1.6.But there is no such restriction for Company Leased Cars ( CLC), can you please confirm and clarify the Tax constraints in such scenarios ? Are the tax circular published by company True and Valid for personal cars with so minimal benefit ? I got confused with the details mention related to it above so want to clarify.

  24. PuttRju S says:

    D P K VENKATA,

    Section 17(2)(viii)(v)

  25. francina says:

    Dear sir,
    My company has introduced employee performance and company performance in the salary structure, both of which are payble monthly. Can I reallocate both these amount under other benefits which can ensure I receive the entire amount and have some tax saving as well? Other components being hra, medical allowance, gratuity, conveyance special allowance and special onsite allowance.

    Thanks,
    Francina

  26. Ahmed says:

    Hi,

    My Company allows us to submit reimbursement bills for Fuel if the car is registered in our Name.

    I use my a car registered in my Father’s name. Can I submit this & avail this tax benefit?

  27. Nemichand meel says:

    can any one tell me if some one getting difence disabilty pension , is this income taxable?

  28. RAGHU NATH BAJAJ says:

    Sir I am retired person and my yearly salary/pension is around 3.40 lacs,beside I earn Rs.1.08 lacs as rent per year for 2 flats. I have paid Rs.12000/- as Municipal Taxes for two flats. My savings are Rs.65000/- PPF and Rs.35000/- Bank Deposits under Tax Savings scheme. I wish to know my Tax liability if any?

    Thanks

    Raghu Nath Bajaj

  29. D P K VENKATA says:

    It is stated that “Actual expenditure incurred on your medical treatment or any of your dependents is exempt up to Rs 15,000 per
    annum as medical reimbursement subject to provision of bills.” Please mention the Section number which permits the same under the Income Tax Act, 1961

  30. Puttaraju S says:

    Mr. Debhashis,

    you can get that benefit only if that car is provided to you by your own company..
    on a friend’s/colleague’s car no exemptions available

  31. Puttaraju S says:

    Mr.Rohin,

    Mobile bill cannot help in saving taxes, it is only in the nature of re-imbursement.

  32. Puttaraju S says:

    Ms.Divya,

    Correct.. all the benefits receivable by you from the company is CTC to the company. In simple words, benefit enjoyed by you is the cost to the company.

  33. Gajendra Bhardwaj says:

    Rashmi :- Ex gratia and bonus are generally yearly/ quarterly component and generally given as %age of basic salary.
    Gratuity is 15/26 of Basic pay.

  34. Atul Bhargava says:

    Dear Mr. Sandeep,

    please check and rectify as contribution to 80C for PF is Rs.1,50,000 for f/y 2014-15

  35. Rohin joshi says:

    Hi I want to know that is mobile bills are help full for saving taxes on yearly bases if yes than how much I got the benefit

  36. Debashis Das says:

    Hello,

    I dont have own car, use my colleague’s car for official and personal purpose.

    Can I applicable for reimbursement for fuel and get tax benefit. If applicable in my case, suggest me how much I can claim in a month and one year.

    Need your suggestion.

    Thanks in advanced,

    Best regards

    Debashis

  37. libero says:

    Hi ,

    I received an offer from an company which offered me the following
    vehicle maintenance (20 percent of basic) : 8922 Rs
    car EMI : 5500 Rs

    What does this mean ?

    Will company provide me a car for riding and also will I be able to 8922 and 5500 Rs in hand without any tax.

    Kindly help me out.

  38. Divya says:

    Hi

    I want to calculate my ctc . My gross is 15,500 . In addition to this ,they paying 10k for living allowance(LA) and 1K as TA . They also providing free accommodations. shall I include my LA ,TA and Free accommodations with my gross amount to calculate CTC . is it correct way of calculating CTC ???

  39. Rashmi says:

    Hi,

    Please help with the salary structure ,in my company 80% empolyes are having below 15K per month salary and 20% above.
    I need to restructure salary components.
    Let say we are giving 20K inhand salary.

    Basic Pay 10000.00
    HRA @ 40% of Basic pay 5000.00
    Medical Allowance 1250.00
    Conveyance Allowance 800.00
    Children Education 200.00
    Bonus Allowance 0.00
    Special Pay 1970.00
    Employer PF 780.00
    Total Gross Earnings 20000.00
    Deductions:
    PF@ 12% 780.00
    ESIC @ 1.75 % 0.00
    Professional Tax 0.00
    Total Deductions 1560.00
    Net Payable 21560.00

    My Manager is asking to include ex-gratie & bonus & gratuity.
    Please suggest how to include in salary components for both the level.

    Thanks
    Rashmi

  40. Batul says:

    Under which section reimbursement of telephone expenses including a mobile phone actually incurred by you on behalf of your employer is not taxable.

  41. AJAY JAIN says:

    SAMAJH NAHI AAYA BHAI.

  42. Rohit says:

    Hi

    I want to now that the car I am using for traveling , that RC should be on my name ,is that complusory, as I have bought the car on the name of my mother .

    So shall I can claim tax reimbursement.

  43. Rajesh says:

    Dear all,

    Pls guide me on following point.
    1)I use my personal vehicle for commuting to & from office & spend approx Rs. 7000/- per month.

    How can I get income tex exemption / benefit for the above expenditure at the time of filing IT return.

  44. Hitesh Kanakia says:

    Can you please tell me, allowance is allowed up to what % of the gross salary. And from where you have got this information

  45. Pankaj says:

    Can please tell me the section in which is mentioned that uniform allowance is not covered in allowance.

  46. Archana says:

    Hello,
    I want to ask that the exemption of Rs. 800 p.m. is for Transport allowance & travelling and conveyance allowance is exempt on actual basis without providing any proof for the same. So, does it mean that there is no difference in Transport allowance & Travelling and conveyance allowance?

  47. Ganesh says:

    If my car is registered in my spouse name and am using it can i claim 1800 toward conveyance allowance…

  48. JAGDEEP SINGH says:

    Hi

    SALARY EMPLOYEE – MOBILE ALLOWANCE ARE TAXABLE OR NOT

  49. zalak thakker says:

    Hi,

    i want to know how pertrol allowces are tax and if some amount i use for personal use what is the tax tretement

  50. satish patel says:

    Dear all,

    Pls guide me on follow points.
    1) Company is not provide me the vehicle but i spend approx 5000 rs on transportation from office to home and vice versa.
    2) I have another two mobile set which bill is not exmpeted from my company.

    Above two point can i get income tex exemption at the timke of file return process.

  51. Saurav says:

    hi,

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

    does it mean that say my CTC has a component of rs.12k for health club membership and i can produce bills to that effect, then that amount is non-taxable??

  52. Suman gosh says:

    Leave encashment while in service is taxable, but is exempt at retirement, subject to prescribed limits and conditions.
    If leave encashment after resigned / termination. this is also non taxable??

  53. Abraham Simons says:

    Company doesnt reimburse fuel and car maintenance. Can I still avail tax exemption. I use my car to travel to office and the cost runs to 6000/- p.m.

  54. amit says:

    1.is mobile allowance taxable or not?
    2.is medical allowance taxable or not?
    kindly answer these questions as early as possible

  55. naveen says:

    is fix medical allowance and mobile allowance are taxable.

  56. Ritu Batra says:

    In case company is providing cab facility as well as subsidized meaia then also employee can receive a conveyance allowance of Rs. 800 and meal vouchers.

  57. navika says:

    whats the actual exemption for running flight allowances?

  58. bhumika says:

    What if company doesn’t provide any exemption? My company is not willing to give any exemption except medical n petrol. Is there any way to save tax by ourselves??

  59. Umesh says:

    • 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.

    This is changed to Rs.100 per day

    Umesh

  60. VINAY SAXENA says:

    I dont understand which level of school agrees to educate one child for Rs 100. And another interesting thing is that, Is rs 900 paid to driver is his monthly salary? Then why govt talk about the minimum wages….??????

  61. R K Sundaram says:

    Car outsourced by the company is provided as conveyance for official purposes… what is the taxability in such a case ?

  62. N.K.Shenoy says:

    If I have a Car loan, Is there any option to avail exemption for the loan installments from in come

    N K Shenoy

    • B.JEEVARATHINAM says:

      There is no exemption for repayemnt of EMI with respect to car loan,
      There is exemption for repayment of EMI of Housing Loan.

      • Mahesh says:

        Hi Jeevarathinam

        The car EMI are reduced from CTC and Gross salary is paid. On the Gross Salary taxes are calculated.

        Till all the EMIS are reduced from the employee, say 3 or 4 years, the car will be in the name of the Company. Later the company will transfer the car to the employees name.

        If the employee does not opt Car EMI scheme the amount will be added to his Gross salary and taxed.

        Regards
        Mahesh

  63. Jimmy Shah says:

    If I use my own car then can i claim exemption for conveyance allownce of Rs. 800/- p.m. and also 1800/- p.m. (+ 900/- for drivers salary)?

  64. Yogesh Patil says:

    Hi,

    Even the Gifts Coupons provided below 5,000 Per Annum also escape the Tax Net.

    Therefore, we can as well include the Gift Coupon per annum Rs. 4,999 or some rounded off figure in CTC to avoid Tax thereon.

    Regards,
    Yogesh B Patil

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