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How to Make Your Salary Package Tax-efficient
Posted on  
May 12, 2011
 
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Make your salary package tax-efficient by planning your income tax well. For income tax planning, you can structure your pay package so that it includes various tax-free payments rather than getting it all as basic salary. Some of the common payments are:

  • House rent allowance (HRA)
  • Transport allowance
  • Reimbursement of medical expense, hotel bills, foreign travel of spouse, and books
  • Car provided by company
  • Food coupons
  • Leave travel concession (LTC)

Your EPF (employee provident fund) contribution is at your discretion; you may adjust it depending on your other investment needs. It is a good idea to raise your employer's contribution up to 12% of your salary, as it is exempt from tax.

Though you get tax benefit on certain allowances mentioned above, all perquisites are taxable as normal salary. Some common perquisites which are taxable as normal salary are:

  • Loan at an interest rate lower than SBI PLR
  • Rent-free accommodation

Salary Package Tax Efficient

About the author
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Sudhir Kaushik has been a practicing tax consultant for the last 17 years. He is a Fellow Chartered Accountant and conducts seminars in large companies to help salaried employees with income tax and investment queries. Sudhir brings domain knowledge of income tax laws and their compliance difficulties faced by individuals. He is the author of Income Tax Handbook For Salaried Employees for smart financial planning and investments for salaried people. He enjoys an excellent reputation and has a strong network in the corporate sector and public sector undertakings.
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