CRACK YOUR SALARY SLIP AND SAVE

TAXES

BASIC SALARY

It’s the most important component of your salary and generally comprises 35-50 % of your total salary. Most of the other components are structured around it.Tax Implications: 100% taxable

Adds to in-hand? Yes

DEARNESS ALLOWANCE

Dearness allowance (D.A.) is part of a person's salary. D.A. is calculated as a percent of the basic salary. This amount is then added to the basic salary along with house rent allowance to get the

total salary. Rates vary as per rural/urban areas etc.Pensioners and the family pensioners are granted D.A. against the price rise. During the reemployment under Central or State Government, Government undertaking, Autonomous body or Local Body, they are not eligible to draw D.A., in which case D.A. is allowed in addition to fixed pay or time scale D.A. is not allowed while the pensioner stays abroad and also in case of employees absorbed in public undertaking or bodiesIf the pensioner stayed abroad without reemployment, he shall be eligible to draw D.A. on pension

DA is fully taxable under salary head of income tax act

HOUSE RENT ALLOWANCE

It’s an allowance to pay your house rent. Normally, HRA is 40-50 % of the basic, based on your location (metro or non-metro).

Tax Implications: You get tax exemption based on whichever of the following is lower•40% of your basic pay•Actual rent minus 10 % of basic•HRA component specified on your salary slip

Adds to in-hand? Generally Yes

CONVEYANCE ALLOWANCE

It’s paid by the company towards cost of travel from home to work and back and is exempt from Income tax.

Tax Implications: Rs 1600 per month or the conveyance allowance component in your salary slip, whichever is lower, is exempted from tax.

Adds to in-hand? Yes, depending on how much you actually spend.

Leave Travel Allowance

It’s given by employers to cover the cost of employee travel while on leave. It includes travel expenses of your immediate family members as well.Tax Implications: Proof of journey required to avail deduction subject to certain limits. Any expenses incurred during the trip apart from travel does not count towards your LTA tax exemption. The exemption is also applicable only for 2 journeys undertaken in a block of 4 calendar years.Adds to in-hand? No.

MEDICAL ALLOWANCE

It is given by employers to cover any medical expenses incurred during the period of employment. It is also generally a reimbursed expense and thus subject to providing proof of expense.Tax Implications: The allowance is exempt up to 15,000 per annum subject to proof of expenses such as medical bills.Adds to in-hand? Yes. If you fail to provide the proof, you still receive the amount, but will be fully taxed.

Performance Bonus Or Special Allowance

It is given to reward or encourage employee performance and varies with performance or company guidelines.Tax Implication: 100% TaxableAdds to in-hand? Yes. It can be variable and therefore, difficult to assess as part of your in-hand.Other Allowances: There are quite a few other kinds of allowances based on the industry or the company. Most such allowances are fully taxable. They might or might not add to your in-hand salary based on the conditions they are subject to.Make sure you talk to the HR and get a clear understanding of the in-hand and tax implications of your salary components.

Entertainment Allowance

Tax Implication: 100% Taxable

 Employees are allowed the lowest of the declared amount –one-fifth of basic salaryactual amount received as allowance or Rs. 5,000.of customers.However, Government employees can claim exemption in the manner provided in section 16 (ii)

This is an allowance provided to employees to reimburse the expenses incurred on the hospitality

THE DEDUCTION PART

OF YOUR SALARY

SLIP

PF is typically 12% of your basic salary which is put into a government controlled body, Employees' Provident Fund Organisation. Your contribution is typically matched by the company subject to certain maximum amount, defined as per the company policy.  You can also choose to opt out from the PF scheme.How to lower this deduction? You can choose to opt out of the PF scheme. In case you opt out, make sure you invest it regularly in better investment options like equity, mutual funds that gives you a higher return. If you are unsure of investing the money, it’s best to stay invested in PF.

Provident Fund:

This is payable only in the following states-Karnataka, West Bengal, Andhra Pradesh, Telangana, Maharashtra, Tamilnadu, Gujarat, Assam, Chhattisgarh, Kerala, Meghalaya, Orissa, Tripura, Jharkhand, Bihar, and Madhya Pradesh. It normally amounts to just a few hundred rupees each month and is subject to your gross tax slab.This amount is deducted from your taxable income.

How to lower this deduction? This deduction cannot be lowered.

Professional Tax:

This amount, which is decided based on your overall tax slab, is deducted on behalf of the income-tax department by your employer.How to lower this deduction? You can reduce this burden by investing in tax savings instruments under Section 80 C or other sections under the IT act.

 Tax deductible at source:

PF / ESIC rate of deduction for both Employee & Employer contribution

The Provident Fund (PF) contribution is 12% of PF Wages from both employee and employer. For the calculation, the maximum limit of Basic is Rs 6500/-. It means even if the employee’s PF Wages is above Rs

6500/-, the employer is liable to contribute only on Rs 6500/-, that is Rs 780/-

However if an employee so desires he may voluntarily contribute more than 12%. Apart from it an employer also has to pay some administration charges. The various accounts of PF Challan are as mentioned below.

Employees complete 12% goes to PF account while employer contributions’ 8.33% goes to Pension Fund and 3.67% goes to PF Fund.

Employee State Insurance Corporation(ESIC) is deducted on gross salary which is 1.75% from the employee contribution & 4.75% from the employer

contribution.

Things to keep in mind when comparing salary slips in offers:

1. Your basic salary is critical as most of your allowances will be based on that figure.2. Look for special allowances and check whether they are performance or event based.3. Do not focus only on the in-hand salary. Look at the other benefits the company provides (health insurance, accident insurance, free food, bus transport, better career growth) which might outmatch a higher in-hand salary offer from some other company

INCOME TAX SLABS

For Men Below 60 Years Of

Age

For Women Below 60 Years Of

Age

For Senior Citizens

For Super Senior

Citizens

Income Tax Deductions

and Exemptions

For Men Below 60 Years Of Age

Income Tax Slab Income Tax RateIncome upto Rs. 2,50,000 Nil

Income between Rs. 2,50,001 - Rs. 500,000

10% of Income exceeding Rs. 2,50,000

Income between Rs. 500,001 - Rs. 10,00,000

20% of Income exceeding Rs. 5,00,000

Income above Rs. 10,00,000

30% of Income exceeding Rs. 10,00,000

Income Tax Slab Income Tax RateIncome upto Rs. 2,50,000 Nil

Income between Rs. 2,50,001 - Rs. 500,000

10% of Income exceeding Rs. 2,50,000

Income between Rs. 500,001 - Rs. 10,00,000

20% of Income exceeding Rs. 5,00,000

Income above Rs. 10,00,000

30% of Income exceeding Rs. 10,00,000

For Women Below 60 Years Of Age

For Senior Citizens (Age 60 years or more but less than 80 years)

Income Tax Slab Income Tax RateIncome upto Rs. 3,00,000 Nil

Income between Rs. 3,00,001 - Rs. 500,000

10% of Income exceeding Rs. 3,00,000

Income between Rs. 500,001 - Rs. 10,00,000

20% of Income exceeding Rs. 5,00,000

Income above Rs. 10,00,000

30% of Income exceeding Rs. 10,00,000

For Senior Citizens (Age 80 years or more)

Income Tax Slab Income Tax RateIncome upto Rs. 5,00,000 Nil

Income between Rs. 500,001 - Rs. 10,00,000

20% of Income exceeding Rs. 5,00,000

Income above Rs. 10,00,000

30% of Income exceeding Rs. 10,00,000

DEDUCTIONS

8390107415

9782244338

VAIBHAV GUPTA