Tax Planning for Salaried Employees

Last Updated at: November 04, 2019
1082

Without proper tax planning, there are claims that majority of the people are paying excess tax. In order to save the excessive tax payments, it is important to plan your investments properly. You will get to know more about tax planning, deductions based on your salary and deductions based on contributions and investments that you make from here.

Are you shedding out a lot of tax from your salary…?

Below you’ll find the list of services that will walk you through the need for the service, the eligibility, documentation procedure and benefits. Our experienced team members are there to guide you and complete the process at ease.

 

Here is the list of deductions and exemptions which you can claim under the Income Tax Act. Almost 70% of people are paying excess tax – without planning their salary structure and investments properly

The first part of this article contains – Deductions based on Salary structure

The second part of this article contains – Deductions based on Investments and Contributions made

File Your Taxes on time and stay Stress-free

Deductions available based on the Salary Structure FY 2018-2019

If employees have the following components in their salary structure – then the exemption from the tax can be claimed based on the following conditions and limits

Section

Particulars

Benefits

10(14)

Transport allowance for business travel and if you don’t have actual bills to claim.

(if actual bills are present they can be claimed as reimbursement of expenses)

Amount of exemption shall be lower of following:

(a) 70% of such allowance; or

(b) Rs. 10,000 per month.

10(13A)

HRA (house rent allowance)

Exemption is available only if employee is staying in  a rental accommodation

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

Salary= Basic + DA (if part of retirement benefit) +

Turnover based Commission.                     Note: (i) Fully taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent.        (ii) It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than Rs.

1,00,000 per annum

16(ia)

Standard deduction

Rs. 40,000 or the amount of salary, whichever is lower.

Without any additional conditions this exemption can be claimed

16 (ii)

Entertainment allowance

Received by the government employees (fully taxable in case of other employees)

Least of the following is deductible:

(a) Rs 5,000

(b) 1/5th of salary (excluding any allowance, benefits or other perquisite)

(c) Actual entertainment allowance received

17(2)(viii)

Food allowance

(provided in any form other than cash – like Sodexo vouchers, etc)

It is exempt to the extent of 50/- per day per meal. Anything provided in excess of 50/- per day per meal is taxable

10(14)

Children education allowance

Up to Rs. 100 per month per child up to a maximum of 2 children is exempt

10(14)

Hostel expenditure allowance

Up to Rs. 300 per month per child up to a maximum of 2 children is exempt

 

10(5)

LTA (leave travel allowance)

The exemption shall be limited to fare for going anywhere in India along with family twice in a block of four years:                                                                            

Journey by air: Airfare of economy class in the National Carrier by the shortest route or the amount spent,

whichever is less                                              Journey by rail: Air-conditioned first class rail fare by the shortest route or the amount spent, whichever is less

Note: (1) Only travel expenditure is exempt but not stay and food expenditure

(2) Foreign travels are not considered for this exemption

10(10AA)

Leave encashment

(i) Government employees: Exempted from tax                  

(ii) Non-government employees: The exemption in respect of leave encashment at the time of retirement will be lower of the following amounts:

 

(1)Period of earned leave standing to the credit in the employee’s account at the time of retirement × average monthly salary.

(2) Average monthly salary × 10 (i.e., 10 months’ average salary).

(3) Maximum amount as specified by the Central Government, i.e., Rs. 3,00,000.

(4) Leave encashment actually received at the time of retirement. Leave encashment received during the employment period by non-govt employees is taxable completely

 

Reimbursement of expenses

(incurred by employee on behalf of company)

Expenses incurred by employees on behalf of the company – are not taxable in the hands of the employee

 

Gifts received from the employer

Monetary gifts are taxable – but non-monetary gifts are exempt up to Rs.50,000 in a year

The next part of this article on “Deductions available for Individuals/ HUF for FY 2018-2019” is to follow.

If you are shelling out a lot of your salary on paying tax, then you will know that is important to plan your investments to minimize the same. From the above-mentioned tips, you would have got to know about the various deductions as per the salary structure so that you do not pay more than you should be paying.

0

Tax Planning for Salaried Employees

1082

Without proper tax planning, there are claims that majority of the people are paying excess tax. In order to save the excessive tax payments, it is important to plan your investments properly. You will get to know more about tax planning, deductions based on your salary and deductions based on contributions and investments that you make from here.

Are you shedding out a lot of tax from your salary…?

Below you’ll find the list of services that will walk you through the need for the service, the eligibility, documentation procedure and benefits. Our experienced team members are there to guide you and complete the process at ease.

 

Here is the list of deductions and exemptions which you can claim under the Income Tax Act. Almost 70% of people are paying excess tax – without planning their salary structure and investments properly

The first part of this article contains – Deductions based on Salary structure

The second part of this article contains – Deductions based on Investments and Contributions made

File Your Taxes on time and stay Stress-free

Deductions available based on the Salary Structure FY 2018-2019

If employees have the following components in their salary structure – then the exemption from the tax can be claimed based on the following conditions and limits

Section

Particulars

Benefits

10(14)

Transport allowance for business travel and if you don’t have actual bills to claim.

(if actual bills are present they can be claimed as reimbursement of expenses)

Amount of exemption shall be lower of following:

(a) 70% of such allowance; or

(b) Rs. 10,000 per month.

10(13A)

HRA (house rent allowance)

Exemption is available only if employee is staying in  a rental accommodation

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

Salary= Basic + DA (if part of retirement benefit) +

Turnover based Commission.                     Note: (i) Fully taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent.        (ii) It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than Rs.

1,00,000 per annum

16(ia)

Standard deduction

Rs. 40,000 or the amount of salary, whichever is lower.

Without any additional conditions this exemption can be claimed

16 (ii)

Entertainment allowance

Received by the government employees (fully taxable in case of other employees)

Least of the following is deductible:

(a) Rs 5,000

(b) 1/5th of salary (excluding any allowance, benefits or other perquisite)

(c) Actual entertainment allowance received

17(2)(viii)

Food allowance

(provided in any form other than cash – like Sodexo vouchers, etc)

It is exempt to the extent of 50/- per day per meal. Anything provided in excess of 50/- per day per meal is taxable

10(14)

Children education allowance

Up to Rs. 100 per month per child up to a maximum of 2 children is exempt

10(14)

Hostel expenditure allowance

Up to Rs. 300 per month per child up to a maximum of 2 children is exempt

 

10(5)

LTA (leave travel allowance)

The exemption shall be limited to fare for going anywhere in India along with family twice in a block of four years:                                                                            

Journey by air: Airfare of economy class in the National Carrier by the shortest route or the amount spent,

whichever is less                                              Journey by rail: Air-conditioned first class rail fare by the shortest route or the amount spent, whichever is less

Note: (1) Only travel expenditure is exempt but not stay and food expenditure

(2) Foreign travels are not considered for this exemption

10(10AA)

Leave encashment

(i) Government employees: Exempted from tax                  

(ii) Non-government employees: The exemption in respect of leave encashment at the time of retirement will be lower of the following amounts:

 

(1)Period of earned leave standing to the credit in the employee’s account at the time of retirement × average monthly salary.

(2) Average monthly salary × 10 (i.e., 10 months’ average salary).

(3) Maximum amount as specified by the Central Government, i.e., Rs. 3,00,000.

(4) Leave encashment actually received at the time of retirement. Leave encashment received during the employment period by non-govt employees is taxable completely

 

Reimbursement of expenses

(incurred by employee on behalf of company)

Expenses incurred by employees on behalf of the company – are not taxable in the hands of the employee

 

Gifts received from the employer

Monetary gifts are taxable – but non-monetary gifts are exempt up to Rs.50,000 in a year

The next part of this article on “Deductions available for Individuals/ HUF for FY 2018-2019” is to follow.

If you are shelling out a lot of your salary on paying tax, then you will know that is important to plan your investments to minimize the same. From the above-mentioned tips, you would have got to know about the various deductions as per the salary structure so that you do not pay more than you should be paying.

0

FAQs

No FAQs found

Add a Question


No Record Found
SHARE
A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.