Yet if you have not re-designed your Salary Package , then this is the change available with you to smartly restructure the same to avoid extra tax burden.
This works only if the HR department of the employer allows you to do so. The HR departments of many organizations are flexible in this regard and can help you tweak your salary package to make it more tax-efficient.
Some of the common payments are:
A) House rent allowance (HRA)–
Salaried individuals who live on rent can claim HRA to lower taxes. It is partially exempt from taxes. You can even claim income tax exemption on both house rent allowance (HRA) and repayment of home loan. If you are living in a house on rent and servicing home loan on another property, you can claim tax benefit for both.
B) Conveyance allowance–
There is no limit on the amount of conveyance allowance a company can offer to its employees. Conveyance allowance is given an exemption of up to Rs.19,200 per annum or Rs.1,600 per month
C) Car provided by company–
Buying own car is the second dream of every Indian which comes after buying a dream house. But Instead of buying a car, ask your employer to lease it out you one as part of your compensation. The leased car is a taxable perk but only a small value i.e. Rs 1,800-2,400 a month depending on the size of the car, will be added to your taxable income.
D) Food coupons–
Food coupons or meal vouchers are coupons that carry a monetary value and which are given by companies to employees as a part of salary. The amount given in the form of food coupons is exempt from tax. Usually a ceiling is specified on the amount which can be issued in the form of food coupons. Food coupons are generally given as an option to employees, which can be used in select restaurants or grocery stores.
E) Leave travel concession (LTC)–
If leave travel allowance (LTA) forms a part of your salary, then this allowance can be availed to lower the tax outgo. But remember that LTA only applies to travel within India. It is available to an individual in respect of two journeys performed in a block of four calendar years.
F) Medical Allowance-
One can claim up to Rs 15,000 a year as medical allowance that is a part of salary and exempt from tax. One has to provide medical bills for the amount shown under this head in order to claim the exemption.
G) Use Employer gadgets–
If an employer provides a computer, laptop or tablet to the employee for professional as well as personal use, the later will be taxed for only 10% of the cost.
H) Employee Provident Fund-
Your EPF (employee provident fund) contribution is at your discretion. It is a good idea to raise your employers contribution up to 12% of your salary, as it is exempt from tax.
I) Plan and Save for Retirement
You can lower your taxable salary by asking your employer to invest in National Pension Scheme (NPS) on your behalf. Under Section 80CCD(2), up to 10% of your basic salary is fully deductible if invested in the NPS.
From the above simple redesigning and restructuring we could smartly reduce our taxable salary package and could able to take home more with bigger smiles & happiness. Now it’s your time to take an action and show your creativity.