Future Generali

8 salary components that can help you save on tax

Income Tax is a tax applied to the salary earned by an employee from the employer. Income Tax Act, 1961 gives power to the government to take income tax from salaried persons. It is a direct tax which helps increase the revenue of the government for it to be able to spend throughout the year.

In India, there are different income tax slabs and income tax is charged according to these slabs. The government can only change the slabs of income tax from time to time. In India, the slabs for income tax are as mentioned below. In addition to income tax, a salaried person also has to pay education CESS as a percentage of the total tax liability.

In India, there are different tax rates for different slabs of income. Every salaried person has to pay minimum Income-tax while staying within the provisions of the law. This very much depends on the salary structure given by the company, until and unless specified by you.

Below mentioned are 8 highly recommended salary components in your CTC to reduce the outgo of income tax from your salary.

  • House Rent Allowance (HRA):Least of the following is exempt:
    • a) Actual HRA Received
    • b) 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Madras)
    • c) Rent paid minus 10% of salary. . Here’s how you can claim even if you don’t receive HRA.
  • Employee Contribution to Provident Fund (EPF): EPF is a very good tax-saving and investment scheme. The amount of EPF is tax-free up to 12% of basic salary.
  • National Pension System (NPS):NPS is also a long term tax saving investment and up to 10% of salary will exempt from income tax if invested in NPS.
  • Standard Deduction: Rs 50000 max from the year 2019 and it covers both conveyance allowance and medical allowance, which were earlier calculated separately.
  • Mobile Phone and Internet Bill Reimbursement: Telephone reimbursement provided to employees is not taxable. Rule 3(7)(ix) states that telephone reimbursement is non-taxable in the hands of the employee.
  • Meal Coupons: Tax-Free up to Rs 50/meal (22 working days). Maximum ₹ 2200 per month.
  • Uniform allowance: Exempt to the extent of expenditure incurred under section 10(14) of the Income Tax Act 1961.
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