Skip to main content

Salary planning Article

1. The salary (basic + DA) should be low. The rest should come by way of such allowances on which the employer pays FBT and you don't pay any tax thereon.


2. Interest paid on housing loan is deductible u/s 24 up to Rs 1.5 lakh (Rs 150,000) on self-occupied property and without any limit on a commercial or rented house.


3. The repayment of housing loan from specified sources is also deductible irrespective of whether the house is self-occupied or given on rent within the overall ceiling of Rs 1 lakh of Sec. 80C.


4. Where the accommodation provided to the employee is taken on lease by the employer, the perk value is the actual amount of lease rental or 20 per cent of the salary, whichever is lower. Understandably, if the house belongs to a family member who is at a low or nil tax zone the family benefits. Yes, the maximum benefit accrues when the rent is over 20 per cent of the salary.


5. A chauffeur driven motor car provided by the employer has no perk value. True, the company would pay FBT. It is @30 per cent on 20 per cent of the value thereby bringing down the effective rate to 6 per cent. Better still, the employee owns the car and the employer pays the cost of petrol and maintenance.


6. Contributions up to Rs 1 lakh (Rs 100,000) per annum to Superannuation Fund of the employee is not taxed either as fringe benefit in the hands of the employer or as perk in the hands of the employee.


7. Contributions to some specified schemes (Company PF, PPF, NSC, life insurance premia, etc.) qualify for a deduction u/s 80C from gross total income with an overall ceiling of Rs 1 lakh. PPF has a ceiling of Rs 70,000 to contributions made to the accounts of self and minor children whereas the contributions to accounts of self, wife and children (major or minor) attract the deductions.


8. Employer's contribution to Company PF in excess of 12 per cent of employee's salary is taxable. Employee contributes equal (or more) amount to his PF account. Again, any excess over 27 per cent of salary contributed by the employer to company Provident Fund and Superannuation Fund put together is to be treated as perks.


9. Any death-cum-retirement gratuity received up to Rs 3.5 lakh (Rs 350,000) -- subject to certain conditions -- is exempt.


10. Leave Travel Allowance given as reimbursement of expenses incurred by the employee and his family for traveling while on leave is exempt, once in two years.



11. Transport allowance for commuting between residence and place of duty is exempt up to Rs 800 per month.


12. Reimbursement, not exceeding Rs 15,000 in a year, for medical treatment from any doctor for himself and his family members is deductible. 13. Under section 80D, deduction up to Rs 15,000 paid as medical Insurance Premiums on the health of assessee himself, his spouse, parents (dependent or not) and dependent children is allowed. Where an individual has insured a senior citizen (parent or himself) a higher ceiling of Rs 20,000 is available. Additional deduction up to Rs 15,000 on premiums paid for parent/s of the assessee has been made available w.e.f. 1.4.08.


14. Professional tax paid by an employee is deductible u/s 16(iii).


15. ESOP was brought under the purview of FBT by Finance Act 07. The employer has a right to collect the FBT tax paid by him on ESOP from the employee. In that case, it will be treated as tax paid by the employee.


16. In respect of HRA, the least of the following is exempt from tax u/s 10(13A): (a) 40 per cent of salary (50 per cent for Mumbai, Kolkata, Delhi and Chennai).# (b) HRA for the period the house is occupied by the employee.# (c) The excess of rent paid over 10 per cent of salary.


An employee living in his own house or where he does not pay any rent is not eligible for this exemption. If you are staying in a house belonging to your family members (preferably not your wife), start paying rent to the owner and ask for HRA from the employer.


17. A helper engaged for the performance of the duties of an office or employment of profit is not considered as a perk.


18. If the employer employs a gardener for the building premises belonging to the employer, it would not be treated as a perk. The possibility of it being extrapolated to other servants is logical.


19. Perk value of confessional loan to the employee for purchase of house or motor cars shall be the difference between the interest payable calculated at the rate of interest for similar loans, charged by SBI and the actual interest charged.


20. Loan for medical treatment specified in Rule-3A is exempt, provided it is not reimbursed under any medical Insurance scheme. Where it is reimbursed, the perquisite value shall be charged from the date of reimbursement on the amount reimbursed but not repaid against the outstanding loan taken specifically for this purpose.


21. Small loans up to Rs 20,000 in the aggregate are exempt.


22. Expenses on meals provided to the employee during his hours of duty are not treated as perks. FA 08 has declared that expenditure on non-transferable pre-paid electronic meal cards is not a perk.


23. FA 08 has also declared that provision of creche facility for children of the employee and sponsoring of an employee sportsman is not a perk.


24. Employer pays FBT on the value of the gifts. Gifts up to Rs 50,000 received without consideration by an individual from any person are tax free in the hands of the donee. However, the Department may claim that such gifts are in lieu of salary.


25. Employer pays FBT on the value of the facility of credit cards and expenses for the club.


26. Where a movable asset is transferred by an employer to his employee directly or indirectly, the perquisite value shall be the actual cost to the employer minus the cost of normal wear and tear @10 per cent for each completed year during which such asset was put to use. In the case of motor cars the normal wear and tear would be @20 per cent whereas in the case of computers, data storage and handling devices, digital diaries, printers, etc., it would be @60 per cent. These do not include household appliances (i.e., white goods) like washing machines, microwave ovens, mixers, hot plates, ovens etc.


27. Uniform allowance to meet the expenditure incurred on the purchase or maintenance of uniform for wear during the performance of the duties of an office or employment of profit is exempt.


28. Expenses for soft furnishings (table cloths, curtains, etc.) including maintenance at the residence for those officers entertaining guests at home for official purpose are also exempt.


29. Goods at concessional rates, membership of professional associations, subscriptions for technical and business journals and newspapers are not considered as taxable perks.


30. Payment or reimbursement by the employer towards bills on Telephones and cellular is not a perk.Caution: If employer is exempt from FBT, employee pays the tax Fringe Benefit Tax is not applicable to an employer who is an individual, HUF, any fund or trust or institution eligible for exemption u/s 10(23C), or registered u/s 12AA. Rule 3 has been amended so as to include valuation of perquisite in case of benefits provided by such employers to its employees w.e.f. FY 07-08 by Notification SO 1896(E) dt 7.11.07.

Popular posts from this blog

Real Returns in Investing

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Real Returns in Investing     A Anil Singh (name changed), 44, works with a private company and believes in investing his entire savings in fixed deposits. His financials from the year 2000 till date is given in the table. Anil's savings in FDs gave him an average return of around 8%. The total amount saved over the 174 months (From January 2000 to June 2014) is Rs 49.80 lakh. The value of his investment today is around Rs 66.71 lakh. Naveen Singh (name changed), 44, works in a similar profile like Anil. However his expenses were on the higher side. His financials are as in the table. Naveen invested only in equities. The total amount saved over the 174 months (From January 2000 to June 2014) is Rs 38.40 lakh. The v...

Budget 2014 Highlights for Saving

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   The new finance minister Arun Jaitley has just presented his first budget. What measures does the budget contain that will specifically impact savers and investors? Here they are: 1. Housing loans exemption for self-occupied properties increased to Rs2 lakh: Earlier this amount was Rs1.5 lakhs. This move barely keeps pace with the inflation in asset values.   2. Investment limit under 80 (C) increased to Rs1.5 lakh: This is a good move again and offers some relief to taxpayers.   3. IT exemption increased to Rs2.5 lakh, Rs3 lakh for senior citizens. This comes as a minor relief for taxpayers.   4. Annual PPF ceiling to be enhanced to Rs1.5 lakh, from Rs1 lakh: This is in tune with the change in 80C.   5. Long term capital gains tax for debt funds has been rai...

ICICI Prudential MIP 25 - Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential MIP 25     (CRISIL Rank 2)   This scheme was launched March 2004. Please see the chart below for the one, two, three and five years annualized returns from this scheme. The minimum investment in the scheme is Rs 5,000. The asset allocation of the portfolio is 24% equity, 72% debt and 4% cash equivalent and others. Please see the chart below for the monthly dividends declared by the scheme, on a per unit basis, over the last 5 years.   For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mai...

Franklin India Smaller Companies Fund - Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Franklin India Smaller Companies Fund   While the universe of small-cap stocks in India is vast, there are very few equity funds which take on the task of sifting through this space for good long-term bets. Franklin India Smaller Companies Fund has managed this with aplomb. What we like about this fund is its significant out-performance of its category and benchmark over the last four years, and its ability to moderate portfolio risk despite investing in the riskiest segment of the equity market. This fund's stock selection strategy, like that of Franklin India Prima Fund is focused on finding companies that generate positive cash flows across business cycles. High return on investment and manageable leverage are also filtering criteria. Says R. Janakiraman, fund ma...

How to open a Capital Gains Account?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   How to open a Capital Gains Account? You can open a capital gains account in an authorized bank. The Government has notified 28 banks which can open the Capital Gains Account on behalf of the Government. You have to apply for opening the account by filling out the required application form (Form A) and submit proof of address, PAN card and photograph. You cannot withdraw funds from a capital gains account using a cheque book or ATM, like you do in your normal savings bank account. There are procedures to be followed to withdraw funds from the capital gains account. Investment in Specified Bonds Section 54EC of Income Act provide that if the seller invests whole or part of capital gains arising from the sale of asset in specified Capital Gains, within a period of six months of the ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now