Section I: Income Tax and Your Career

• Ques: Make your salary package tax-efficient
• Ans: Key points:
  • For tax planning, you can structure your pay package so as to include various tax-free payments in your package rather than getting all pay 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 mentioned below:
    • loan at an interest rate lower than SBI PLR
    • rent-free accommodation