Tax Saving hints for Salary

   1.       It should be ensured that, under the terms of employment, dearness allowance and dearness pay form a part of basic salary. This will minimise tax incidence on House Rent allowance, Gratuity, Commuted Pension and Employer’s contribution to Provident Fund.

2.       Commission payable as per terms of employment at a fixed percentage of turnover achieved by an employee falls within the expression “Salary”. So that tax incidence on House Rent allowance, Gratuity, Commuted Pension would be lesser if commission is paid at a percentage of turnover achieved by the employee.

3.       As uncommuted pension is always taxable, employees should get their pension commuted. Commuted pension is fully exempt in case of government employee and partly exempt from tax in case of non government employee who can claim relief under section 89.

4.       An employee being member of recognised provident fund who resign before completing 5 years of continuous service, should ensure that he joins a concern which maintains a recognised provident fund for the simple reason that accumulated balance of the provident fund with the former employer will be exempt from tax, provided same is transferred to the new employer, who also maintains a recognised provident fund.

5.       Employer’s contribution towards a recognised provident fund is exempt from tax upto 12 percent of salary, employer may give extra benefit to their employees by raising their contribution to 12 percent of salary without increasing any tax liability.

6.       While medical allowance payable in cash is taxable, provision of medical facilities in certain hospitals is not taxable if some conditions are satisfied. Therefore employee should go in for free medical facilities instead of a fixed medical allowance.

7.       Since incidence of tax on retirement benefits like gratuity, commuted pension, accumulated balance of an unrecognized provident fund is lower if they are paid in beginning of the financial year, employers and employees should mutually plan their affairs in such a way that retirement, termination or resignation, as the case may be, takes place in the beginning of financial year.

8.       An employee should take the benefit of relief available under section 89 wherever possible. Relief can be claimed even in case of a sum received from unrecognized provident fund so far as it is attributable to the employer’s contribution and interest thereon. Although gratuity received during the employment is not exempt from tax under section 10(10), relief under section 89 can be claimed. It should be however, be ensured that the relief is claimed only when it is beneficial.

9.       Pension received in India by a non resident assessee from abroad is taxable in India. If however such pension is first received by or on behalf of  the employee in a foreign country and later on remitted to India, it will be exempt from tax.

10.     As the perquisite in respect of leave travel concession is not taxable in the hands of employees if certain conditions are satisfied, it should be ensured that the travel concession should be claimed to the maximum possible extent without attracting any incidence of tax.

11.     As the perquisite in respect of residential telephone, providing use of computer/laptops, gifts of movable assets (other than computer, electronic items, car) by employer after using for 10 years or more and free refreshments during office hours, are not taxable, employees can claim these benefits without adding to their tax bill.  

12.     Since the term salary include basic salary, bonus, commission, fees and all other taxable allowances for the purpose of valuation of  rent free house, it would be advantageous if an employee goes in for perquisites rather than for taxable allowances. This will reduce valuation of rent-free house.

14.     If rent-free furnished or unfurnished accommodation is provided by the employer at concessional rent, deduction under section 80GG can be claimed if certain conditions are satisfied.

Income Tax Query-IN MY MIND

  1. The official website of Income Tax department is

2 . As per Income Tax Act, Income is taxable under five heads- Salary, House Property, Business or Profession, Capital Gain and income from other Sources. It sounds so simple but in reality it involves various complexity level in their calculation.

3. Form 16 is taken from Employer is must for an Salaried Employee.

4. A Salaried Employee can file Income Tax Return by using Form 16 and adding  other Sources of Income.

5. From FY 2019-20,The standard deduction that was allowed was equivalent to Rs. 50000 for salaried employee.

6. Individual having taxable income upto Rs. 500000 to get full rebate of tax of Rs. 12500.

7. TDS threshold on interest on bank and post office deposits raised from Rs. 10000 to Rs. 40000.

8. Section 54 Capital Gains exemption now available on two house properties (once in a lifetime).

9. Form 26AS is a summary of taxes deducted on your behalf and taxes paid by you. This is provided by the Income Tax Department. It shows details of tax deducted on your behalf by deductors, details on tax deposited by taxpayers and tax refund received in the financial year. This form can be accessed from the IT Department’s website.

10. The lower your taxable income, the lower taxes you ought to pay. So be sure to claim all the tax deductions and benefits that apply to you. Section 80C of the income tax act can reduce your gross income by Rs 1.5 lakhs. There are a bunch of other deductions under Section 80 such as 80D, 80E, 80GG, 80U etc. that reduce your tax liability.

Rent Free Accommodation?

What is Rent Free Accommodation? What is it taxability? How is it different from House Rent Allowance? Sometimes the employer provide houses to its employees for residential purposes and do not charge anything from them and in some cases to some extent. RFA i.e. Rent Free Accommodation is a part of perquisites that are considered as additional benefits getting from your employer received in kind and it is taxable as per the provisions of Income Tax Act. RFA is a perquisite whereas HRA is an Allowance.
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House Rent Allowance?

What do mean by House Rent Allowance? House Rent Allowance also known as HRA is given by employer to its employee as a part of their salary. This type of allowance proves to be beneficial for an employee as it reduces the tax liability of employee. Employee can get deduction upto 50% of Salary or @40% of salary depending upon the states in which he resides. Employee can only get deduction if he lives or resides in a rental accommodation.

Employers give financial assistance to their employees by giving them Rent allowance. If an employee stays in his or her house then such tax deduction in regards to House Rent Allowance would not be allowed to him or her.

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What if Form 16 not received from Employer?

Although, its mandatory for an employer to issue Form 16 to its employee but in any case employer does not give or issue Form 16 to its employee then how an employee can file his ITR i.e. Income Tax Return without Form 16, here below are the steps required to follow by the employee to file his Income tax Return without Form 16.

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