MAXIMISE YOUR SAVINGS: BREAKDOWN OF BASIC SALARY COMPONENTS FOR TAX BENEFITS
Saving on taxes can help you to get more disposable income. To save more income tax it is very important to understand the various components of salary. Time Now explains here the basic components of the salary which can help you to navigate effective tax savings plans.
Basic Components Of Salary
Basic Salary:
The fixed salary that is paid by the employer every month includes the Basic pay, House Rent Allowance (HRA) and 12 per cent of your basic salary goes into the Provident Fund (PF).
HRA (House Rent Allowance):
If you receive HRA, you can claim tax benefits on rent paid, provided you submit rent receipts. Even if you don't live on rent, you can save by putting the property in your parents' name, entering a rental agreement, and paying them rent. However, your parents need to declare this in their income tax returns.
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Medical Allowance:
Some companies offer Medical Reimbursement; submitting medical bills allows to claim reimbursement. If bills aren't submitted, this amount adds to your taxable income and it is valid for every financial year.
Conveyance Allowance:
Given for meeting travel expenses from home to work, one can claim this by submitting fuel bills, cab receipts, or transport bills.
LTA (Leave Travel Allowance):
Salaried employees can avail LTA for a trip within India very few organisations offer this, but only with their spouse, children, and parents. Bills must be submitted to the employer for exemption.
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Special Allowance:This is the remaining part of your salary after basic, HRA, LTA, and transport allowance allocations. It's fully taxable and added to your taxable income.
Variable or Bonus:
Paid once or twice a year as a performance incentive, the variable or bonus is 100 per cent taxable.
Contribution to PF (Provident Fund):
Both the employee and employer contribute 12 per cent of the basic salary monthly towards the Employee's Pension Fund and Provident Fund.
2024-01-13T07:10:18Z dg43tfdfdgfd