Oh. So is it possible to save tax in your salary structure? But how?
Your salary is made of many components like basic salary, allowances (taxable and exempt), perquisites etc. While calculating taxable salary, some of these components are taxed as per Income Tax Act, whereas some stand exempt under the law or partial for some of the cases, subject to conditions. We will give you some of those items or parts of the salary structure, which would help you take more salary to your home.
There are various allowances and perks which are exempt from tax and you can easily claim them provided that they are a part of your salary structure. So by restructuring your salary, and including these allowances, you can reduce your taxes in a big way. You will have to rework your salary structure with your Employer.
What you can do to save tax:
- Ask your employer/HR/Payroll department to restructure your salary
- Make sure you submit all bills/receipts on time. Most of these allowances can only be claimed via the employer (and not at the time of filing your income tax return)
Here is the list of such 12 benefits that can lower your tax outgo significantly
Example to understand salary restructuring to lower your tax outgo in FY 2018-2019
Below is the example on how can you change the structure of your salary to reduce taxes. In this example Basic Salary has not been changed as change in it can impact EPF contribution that you and your employer make. Lowering EPF may not be a good thing for building a retirement corpus. We have considered LTA taxable before and after CTC tweak, as LTA can only be claimed twice in a block of 4 years. HRA has been claimed after tweak assuming that rent paid per month is Rs 12,000 and the employee is living in one of the metros. Do remember that whoever you are paying rent to (say parents or siblings) must include this income in their income tax return.
You can talk to your HR or Payroll department to restructure your salary components to enjoy these tax benefits.
As you can see earlier tax payable was Rs 12,875. It has been brought down to 0 after restructuring.
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