Many companies allow their employees to make changes in their CTC at the beginning of the financial year. If your company gives you this option, restructure your salary by choosing tax-efficient components. Here are eight exemptions, perquisites and deductions that you should consider including in your CTC:
1 Fuel, Travel Reimbursements
If travelling by taxi for work, the entire amount can be reimbursed with no tax implication. If using a self-owned vehicle or one provided by your company for official purposes, you can claim the reimbursement of fuel and maintenance expenses. If the vehicle is also used for personal purposes, the perk has a taxable value of Rs 2,700 for cars of engines less than 1. 6 litres and Rs 3,300 for bigger cars.
2 Driver’s Salary
Senior executives are also given the option to hire a driver. The salary given to the driver has a nominal taxable value of Rs 900 per month, but can save a big chunk of your tax.
3 Leave Travel Assistance
Reimbursement of travel costs of your family during vacations is tax-free if claimed twice in a block of four years. For the past two years, LTA could not be used very efficiently due to Covid-related restrictions. But now that travel restrictions have been lifted, it makes sense to opt for this big tax saver in your CTC. LTA should be made part of CTC at the beginning of the year. You cannot opt forit later during the year or claim it while filing ITR.
4 Movable Assets
Big savings are possible if the company offers to buy movable assets for its employees. Under Section 17(2), gadgets and appliances bought in the name of the company and given to the employee for personal use are taxed at only 10% of the value. In the case of computers, there is no tax at all. This gained importance during the work from home phase in 2020 after the Covid outbreak.
5 Internet, Phone Bills
Internet and phone bills soared during the pan54demic when people worked from home. Reimbursements of these expenses are tax-free in the hands of the employee. But you need to submit actual bills.
6 Newspapers, Periodicals
Similarly, the reimbursements of bills for newspapers and periodicals are tax-free if supported by actual bills.
7 Meal Coupons
This is tax-free for up to Rs 50 per meal, which works out to around Rs 2,200 per month. Though this perk has been there for many years, it was not very widely used. But the introduction of digital wallets has madeit easier for employees to use this perk without having to keep a bill for every meal. For companies, too, the compliance has eased thanks to digital wallets.
8 NPS Contribution
This benefit, offered by many companies, is an unpolished gem. It can reduce tax significantly while building a retirement corpus. Up to 10% of the basic pay put in NPS is tax-free under Sec. 80CCD(2). Yet, barely 10% of employees who were offered this benefit have actually opted for it, even though NPS scores over mutual funds in terms of costs and beats other retirement saving options (such as Provident Fund, PPF and insurance plans) in terms of returns. However, opting for NPS will reduce your take-home because the amount gets invested.
The author is CEO and founder of tax filing portal Taxspanner. com
1 Fuel, Travel Reimbursements
If travelling by taxi for work, the entire amount can be reimbursed with no tax implication. If using a self-owned vehicle or one provided by your company for official purposes, you can claim the reimbursement of fuel and maintenance expenses. If the vehicle is also used for personal purposes, the perk has a taxable value of Rs 2,700 for cars of engines less than 1. 6 litres and Rs 3,300 for bigger cars.
2 Driver’s Salary
Senior executives are also given the option to hire a driver. The salary given to the driver has a nominal taxable value of Rs 900 per month, but can save a big chunk of your tax.
3 Leave Travel Assistance
Reimbursement of travel costs of your family during vacations is tax-free if claimed twice in a block of four years. For the past two years, LTA could not be used very efficiently due to Covid-related restrictions. But now that travel restrictions have been lifted, it makes sense to opt for this big tax saver in your CTC. LTA should be made part of CTC at the beginning of the year. You cannot opt forit later during the year or claim it while filing ITR.
4 Movable Assets
Big savings are possible if the company offers to buy movable assets for its employees. Under Section 17(2), gadgets and appliances bought in the name of the company and given to the employee for personal use are taxed at only 10% of the value. In the case of computers, there is no tax at all. This gained importance during the work from home phase in 2020 after the Covid outbreak.
5 Internet, Phone Bills
Internet and phone bills soared during the pan54demic when people worked from home. Reimbursements of these expenses are tax-free in the hands of the employee. But you need to submit actual bills.
6 Newspapers, Periodicals
Similarly, the reimbursements of bills for newspapers and periodicals are tax-free if supported by actual bills.
7 Meal Coupons
This is tax-free for up to Rs 50 per meal, which works out to around Rs 2,200 per month. Though this perk has been there for many years, it was not very widely used. But the introduction of digital wallets has madeit easier for employees to use this perk without having to keep a bill for every meal. For companies, too, the compliance has eased thanks to digital wallets.
8 NPS Contribution
This benefit, offered by many companies, is an unpolished gem. It can reduce tax significantly while building a retirement corpus. Up to 10% of the basic pay put in NPS is tax-free under Sec. 80CCD(2). Yet, barely 10% of employees who were offered this benefit have actually opted for it, even though NPS scores over mutual funds in terms of costs and beats other retirement saving options (such as Provident Fund, PPF and insurance plans) in terms of returns. However, opting for NPS will reduce your take-home because the amount gets invested.
The author is CEO and founder of tax filing portal Taxspanner. com
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