Which salary component is taxable

Abc Large. Getty Images Structure your salary in such a way that you reduce your tax outgo as much as possible. Your salary structure consists of several components which can help you reduce your tax burden. While some of these components are fully or partially taxable, some may be fully exempt from tax.

Therefore, how your salary is structured is of utmost importance; as you would always seek to maximise your take-home salary by minimising the tax burden. Do keep in mind that from April 1, , a salaried individual has the option to opt for the new income tax regime which comes sans tax exemptions and deductions such as house rent allowance , deductions under Section 80C, 80D etc. If an individual opts for the new tax regime, then the individual will not be able to claim some of the below-mentioned components from salary to reduce tax burden.

Here are 10 components that can be used by an employee to minimise their tax burden and plan their salary structure accordingly. Your legal guide on estate planning, inheritance, will and more. ETPrime stories of the day Logistics How sustainable supply chains helped companies stay afloat in the pandemic. Subscribe to ETPrime. Browse Companies:. Find this comment offensive? This will alert our moderators to take action Name Reason for reporting: Foul language Slanderous Inciting hatred against a certain community Others.

The reason that this comes up is that an employee sent on assignment will naturally be most concerned about after tax income, which may differ if they were working in the home country. Also, there may be unusual expenses or allowances as part of the assignment to take into account. When we run your payroll through our GEO local partner, the Indian tax laws will be applied to at least a portion of employee income depending upon whether you have set up some type of split payroll.

However, these amounts may be offset by tax treaties which can offer some relief, or you might have to offer some type of tax equalization to the employee to ensure fairness. The complexity of Indian tax laws make a DIY payroll a challenge. Shield GEO, through our local Indian partners, can run a fully compliant payroll for your company, as well as give you pre-assignment estimates of taxable income and exemptions.

This can be very useful for employees who may not understand the nuances of the local tax laws, and really only want to know the final amount of their monthly pay check.

Our local partner will ensure that all withholding and tax deductions are made according to Indian regulations, and will give the employee peace of mind that their income will be as predicted. The company can now reimburse both the driver salary and running expenses fully tax exempted. But it would add Rs 1, per month for car less than CC Rs 2, per month for bigger car along with Rs per month for driver salary as perquisite.

This perk is added to the income and taxed accordingly. Do you know how much tax you need to pay for the year? Have you taken benefit of all tax saving rules and investments? Following is the list of salary components which was tax free in the past but has been abolished since then.

You can claim up to Rs 15, per year against medical expenses by submitting medical bills. Even cost for eye testing and spectacles frame and lens costs are covered. Everyone hates Taxes and go out in full force to save it — sometime legally and sometimes beyond the law. Learn about them here and use it to your advantage. Transport Allowance up to Rs 3, per month for orthopedic person is still tax free.

As you can see the presence of above tax free salary components can easily lower your annual taxable income by Rs 1.

This means annual saving of Rs 6, for person in lowest tax bracket and Rs 40, for person in highest tax bracket. As you can see with the above income tax calculation, salary components and salary structure plays a very important role in how much income tax you pay. Though the government keeps on tinkering with the tax rates and slabs every year but it has not looked into most of the above exemptions.

The exemption of children education of Rs and Rs for hostel is again not helping anyone. Disallowing finance charges, which were allowed in earlier years, needs re-consideration — Matter remanded back to AO. Tax Audit Series-2 — Business Vs. Whether depreciation on acquired goodwill allowable under Income Tax Act, Deduction allowable on loss suffered by assessee on Foreign Exchange Fluctuation Loss.

January 30, at am. Shubhro says:. August 18, at am. Piyush says:. Hello Soniya Ji, Is it possible for you to share the Excel with all this salary formula? Thank you. July 13, at am. Yaqoob Khan says:. June 19, at pm. Abhi says:. January 3, at pm. September 7, at pm.