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Client Bangalore

Salaried Employees

1. Basic Salary

This is a fixed component and forms the basis of other portions of salary.

2. House Rent Allowance

The allowance is for expenses related to rented accommodation. Salaried individuals who live in a rented accommodation can claim House Rent Allowance or HRA to lower their Income tax Cost.

3. Medical Expenses Reimbursement

Exemption for Medical Expenses reimbursement for self as well as Dependants can claimed upto Rs.15,000of bills are submitted to employer.

4. Conveyance Allowance

Conveyance allowance is given to employees to meet travel expenses from residence to work. The conveyance allowance for up to Rs.9,600 per annum is exempt from tax.Starting FY 2014-15, this limit has been increased to Rs.19,200 per annum.

5. Leave Travel Allowance

employees can avail exemption for tours within India under Leave Travel Allowancefor shortest distance on a trip with his spouse, children and parents.

6.Other Special Allowance

Any number in your salary by the name of 'special allowance' is fully taxable.

7. Bonus

Bonus is usually paid once or twice a year is 100% taxable.

8. Employee Contribution to PF

Both employer and employee contribute a 12% equivalent of the employee's basic salary every month toward employee's pension and provident fund. An interest of about 8.5% gets accrued on it.

9. Professional Tax

Professional tax or tax on employment is a tax levied by a state, just like income tax which is levied by the central government. The maximum amount of professional tax that can be levied by a state is Rs 2,500. It is usually deducted by the employer and deposited with the state government. In your income tax return, professional tax is allowed as a deduction from your salary income.

 

10.     Amount received as compensation for leave days accumulated is referred to as leave encashment and it is taxable as salary subject to exemptions available under the Income tax act.

11.     Any compensation received upon voluntary retirement or seperation is exempt from tax as per Section 10(10C) when the following conditions are fulfilled

  • Compensation received is towards voluntary retirement or separation
  • Maximum compensation received does not exceed Rs.5,00,000
  • The recipient is an employee of an authority established under the Central or State Act, local authority, university, IIT, state government or central government, notifued institute of management, or notified institute of importance throughout India or any state, PSU, company or cooperative society.
  • The receipts are in compliance with Rule 2BA

12.     Pension is taxable under the head salaries in the income tax return. Pension is paid out periodically on a monthly basis usually. You may also choose to take pension as a lump sum (also called commuted pension) instead of a periodical payment. Pensions are exempt in specified cases.

13.     Gratuity is a retirement benefit that employers provide for their employees. The employee is entitled to receive gratuity when he completes five years of service at that company. It is however only paid on retirement or resignation.Gratuity received on retirement or death by a Central, State or local government employee is fully exempt from tax for the employee or his family.