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Salary Income Tax
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Tax Planning For Salary Package

All income received as salary under Employer-Employee relationship is taxed under this head. If the Income exceeds the minimum exemption limit the Employers must withhold tax compulsorily as Tax Deducted at Source (TDS), and provide Form 16 to their employees, which shows the Details of tax deductions and net paid income.

Tax planning For your Salary Cost To Company(CTC) The Components of Salary are divided into DA, HRA, Conveyance Allowance, Variable Incentives etc. In order to get Maximum Tax Benefits, the following provisions of income tax which are beneficial to employee should be included in the Salary CTC

1) HRA: Calculation of HRA

Under sections 10(13A) of Income Tax Act, 1961 allowance is defined as an amount received by an employee paid by his/ her employer as a rent of his/her house. There is no exemption in tax if he is living in his own house or house for which he is not paying rent.

Computation of Taxable HRA:

Particulars Amt (Rs.) Amt (Rs.)
Amount Received during the Year HRA   XXX
Exemption under section 10 (13A)
Less: Least of the following is exempt :
  1. Actual Amount of House Rent Allownace
  2. 50% (for Chennai, Mumbai, Kolkata and Delhi) or 40% (for Other Place) of Salary.
  3. Rent paid for the accommodation over 10% of the salary*.
Xxx
Xxx

Xxx
XXX
Taxable House Rent Allowance   XXX
* Salary=Basic+DA (forming part of benefits) +commission on sale on fixed rate.

Tax Point for HRA :


The maximum benefit of HRA can be derived by having all the above 3 components to be of more or less the same amount. Taxless Allowances
  1. Research Allowance: Any allowance granted for encouraging the academic researches and other professional pursuits.

  2. Providing for use of Computer or Laptop.

  3. Gifts in kind upto Rs.5000 is exempt.

  4. Telephone charges or Mobile charges is not chargeable to tax.

  5. Amount spent for providing free education facilities and taining of employees is not taxable.

  6. The amount of employer contribution towards
    • Recognised PF (Upto 12% of Salary).
    • Approved superannuation fund.
    • Group insurance schemes.
    • Employees state insurance schemes.
    • Fidelity Guarantee Scheme

  7. Children Education Allowance : Rs.100/child Max for 2 Children

  8. Hostel Expenditure Allowance Rs.300/child Max for 2 Children

  9. Medical Expenses Reimbursement*Max Upto Rs.15000 pa

  10. Transport Allowance Rs.800 pm (Irrespective of the amount spent)

  11. Leave Travel Allowance

Computation of Taxable Salary Income

Particulars Amt (Rs.) Amt (Rs.)
Gross Salary Income   xxx
Add: Value of Perquisites Chargeable to Tax xxx  
Add: Profits in Lieu Of Salary xxx xxx
 
Less: Allowance to the extent Exempt From Tax
  1. Children Education Allowance :

    Rs.100/child Max for 2 Children

  2. Hostel Expenditure Allowance
    Rs.300/child Max for 2 Children
  3. Medical Expenses Reimbursement*
    Max Upto Rs.15000 pa

  4. Transport Allowance
    Rs.800 pm (Irrespective of the amount spent)







XXX

XXX


XXX
XXX

XXX
XXX

XXX
XXX
   


XXX   
XXX




XXX



XXX


XXX


XXX

Less: Deduction under Section 16 :    
  1. Professional tax
  2. Entertainment Tax
xxx
xxx
  Xxx
Income from Salary   Xxx
 
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