The Union Budget to be presented on February 1 is expected to revise the current salary slab. Salary up to ₹4,00000 may be tax exempted. By restructuring salary, you can further avail tax deductions.
The budget of 2017 can bring good news for the salaried employees as the Finance Minister, Arun Jaitley, might increase the salary slab and exempt personal income up to ₹4,00000 from tax. The Union Budget to be presented on February 1 is expected to revise the current salary slab and bring in a new income structure between ₹4,00000 and ₹10,00000 which would be taxed at %10.
A Deccan Herald report quoting a government source and claimed that the central government wants to widen the income tax base to enhance compliance via tax rate overhaul. “There is a need to widen the tax base and improve compliance. The rate overhaul is required to curb black money as well,” the source was quoted by the daily as saying.
As per the report, whose who earn between ₹10,00000 to ₹15,00000 may have to pay 15% tax, those earning ₹15,00000 to ₹20,00000 may be taxed at 20%, and finally, those above ₹20,00000 might be taxed at 30% flat.
If you are a salaried employee, you can also structure your salary to ensure more tax saying. Following are couple of simple ways to restructure your salary to make it tax friendly:
Basic salary structure:
On the CTC, the basic salary is fully taxable and therefore, it should be lesser for those whose earnings are yet to reach higher level. By adjusting the basic salary and adding more on other allowances a beginner to mid-level employee can ensure more take home and lesser tax deductions. Therefore, add more on your HRA, PF, medical, conveyance allowance etc and take home a better salary. These components can also be taxed, but the rates are lower.
For those drawing higher salary has other tax benefits and therefore, rather than a higher take home per month they should prefer higher basic salary and better tax benefits.
Tax exempted allowances:
Certain allowances are tax exempted under the Income Tax Act, such as HRA, LTA, and gratuity, academic allowance etc. If these allowance are components of your salary then adjust the salary accordingly to make some additional tax saving.
Perquisites:
Perquisites are the benefits and amenities provided by the employer to the employee. The Income Tax Act also exempts some of the perquisites from taxation. If your CTC has this component than avail the benefit, take home more and pay lesser income tax.
