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Discussion > Income Tax > Tax planning >

Salary Structure

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CA Final


[ Scorecard : 192]
Posted On 05 May 2011 at 17:11 Report Abuse

 

According to below details on ctc of 8,00,000 pa for the f.y 10-11 only 12896 tax is paid

just because of the salary break up

 

can any one let me know whether is break up is correct accroding to it exemption limits on allowances

 

Structuring your salary to maximize take home

 


We all know the numbers on the CTC (Cost To Company)but the take home 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- Most used sections under the IT Act, 1961 are- 80C, 80D, 80G and Sec 24.

But, did you know we can save much more on taxes by structuring our salary better? 

     

Let us consider a few components which can be used to reduce the tax liability on our salary income:-

    

  1. 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 incurred actually and bills provided, they are not taxable up to a specified limit under each head.
  2. Conveyance: For conveyance, up to 800 per month is allowed as deduction without providing any bills.
  3. Medical Allowance: Bills have to be provided; up to 15,000 per annum is allowed as deduction. This can be claimed for self, spouse, children, parents and siblings who are dependent on the assessee.
  4. Leave and Travel Allowance:2 trips in a block of 4 years is allowed and only travel within India can be claimed as deduction. So unfortunately you won't be able to claim for those Myrtle beach flights! It can be claimed for self, spouse, children, parents but only if the employee (assessee) is travelling 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).
  5. Education Allowance: An amount of up to 2,400 per annum is tax-free.
  6. Qualification Allowance: An amount of 24,000 per annum is tax-free.
  7. Training Allowance: An amount of up to 14,000 per annum is tax-free if the employee provides relevant bills.
  8. Telephone Allowance: An amount of 12,000 per annum is tax free if the phone is used for official purposes and bills submitted.
  9. Professional Journal : An amount of 12,000 per annum is tax-free.
  10. Uniform Allownace : An amount of 24,000 per annum is tax-free.
  11. HRA: House Rent Allowance can be claimed if one lives in a rented premises and the rent exceeds 10% of the salary. The actual HRA exempted from tax is 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).

 

Break Up

Monthly

Annual

Tax Treatment

Basic

40000

480000

Taxable

HRA

16000

192000

Taxable

Conveyance

800

9600

Tax Free

Professional Journal

1000

12000

Tax Free

Uniform Allowance

2000

24000

Tax Free

Qualification Allowance

2000

24000

Tax Free

Education Allowance

200

2400

Tax Free

Medical Allowance

 

15000

Reimbursement Tax Free

LTA

 

15000

Reimbursement Tax Free

Training Allowance

 

14000

Reimbursement Tax Free

Telephoen Allowance

 

12000

Reimbursement Tax Free

Total

62000

800000

 

 

 

 

Salary Income

 

Rs.8,00,000

Less: Deductions

 

 

Conveyance

9600

 

HRA

192000

 

Professional Journal

12000

 

Uniform Allowance

24000

 

Qualification Allowance

24000

 

Education Allowance

2400

 

Medical Allowance

15000

 

LTA

15000

 

Training Allowance

14000

 

Telephone Allowance

12000

 

PT

2400

 

Total Deductions

 

322400

Gross Salary(A)

 

477600

Deduction under VIA

 

 

80C

100000

 

80D

15000

 

Total Deductions(B)

 

115000

Net Taxable Income(A-B)

 

362000

Tax

 

12520

Education Cess @ 3%

 

376

Total Tax

 

12896

 

 

 

 

 

 

 

 



Total thanks : 3 times

Online classes for CA CS CMA



Alok Siddapur
Consultant


[ Scorecard : 229]
Posted On 11 May 2011 at 10:40

Uniform allowance and Professional Journal is exempt from tax to the extent expense has been incurred.[sec 10(14) read with rule 2BB]

Telephone allowance should not be paid as allowance but should be paid as reimbursement on submission of actual bills.

Dont know the purpose for which qualification allowance is paid, but the same has not been exempted under rule 2BB(1) 



Total thanks : 1 times




PRAVIN DALAL
GM Corporate - Accounts


[ Scorecard : 37]
Posted On 31 March 2012 at 11:33

Hi Kavitha

 

I read your article. It is very useful. But as per current rules for Salary IT wheather above rules are

still exists or modified , if yes will you able to ellorate it ?

 

Regards

Pravin




kailash soni
CA. FINAL STUDENT


[ Scorecard : 63]
Posted On 15 May 2012 at 13:24

thanks & it helped me a lot....




MAKESH.S
ACCOUNTANT


[ Scorecard : 28]
Posted On 04 July 2012 at 11:23

madam i have one doubt Qualification Allowance Means



MAKESH.S
ACCOUNTANT


[ Scorecard : 28]
Posted On 04 July 2012 at 11:25

madam i have one doubt Qualification Allowance Means pls.explain it



MAKESH.S
ACCOUNTANT


[ Scorecard : 28]
Posted On 08 July 2012 at 00:41

hellow any one can answer for my doubt..........


There are 6 Replies to this message






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