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How to Make Your Salary Package Tax-efficient

June 24, 2016 by Sudhir Kaushik

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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

Filed Under: Tax Refunds

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