Increase your take home pay by restructuring your salary


Everyone always wants to plan their salary components in advance to reduce tax on salary and save tax. Hence, it is highly require to understand your salary structure and discuss it in detail with your HR to get a favourable salary break-up before you hands in with your salary.

In this article, we will analyse a few salary components that form part of your salary structure and how their restructuring can help to reduce tax liability and increase your take home.

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) 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.

C) Food Coupon

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.

D) 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.

E) 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.

F) 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.

G) 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, 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 can reduce our tax, and could able to take home more. Centrik will help you in keeping your tax lower and make you happy with more cash in hand.

Note – Please note that the above article is for education purpose only. This is based on our interpretation of laws which may differ person to person. Readers are expected to verify the facts and laws.

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