How to Design Salary Package!

The following are the points are worthy to note before designing the good salary package to an employee.

As said by someone, “tax evasion is a crime but tax planning is inevitable”

Let us proceed to know how to save your salary from the legal burglary!

1. House Rent allowance [Sec 10(13A)]: HRA granted to an assessee by his employer is exempt to the extent the least of the following:

a) Excess of rent paid over 10% of salary due for the relevant period; or

b) If the accommodation is in ,Mumbai, Calcutta, Delhi & Chennai – 50% of salary and in any other places – 40% of salary due for the relevant period; or

c) Actual allowance received for the relevant period.

Exemption is not available to an assessee who lives in his own house, or in a house for which he does not pay any rent.

Salary means, basic, DA if provided in terms of employment and commission as a percentage on turnover achieved by the employee.

Individual assessee those who does not have HRA component in his salary package but pays rent can approach section 80GG of the Act, which gives least of the following as deduction under chapter VI-A

The Rent paid is allowable as deduction to the extent of the least of the following:

a) Excess of rent paid over 10% of total income

b) 25% of total income

c) Rs.2000 per month

Total income means, gross total income as reduced by deductions under chapter VI-A except 80GG
Conditions to be fulfilled:

1) The assessee should not be in receipt of HRA

2) The assessee, his spouse, or minor child or the HUF in which he is a member should not own any residential accommodation at that place.

3) No claim for self-occupied property should be made in respect of any accommodation.

4) Assessee must file declaration in Form No.10BA wherein he confirms the details of rent paid and fulfillment of the other conditions.(Rule 11B)