Ideal Salary Breakup

What is an ideal salary breakup in the Indian context? That helps the employee maximise take home and reduce personal IT.

asked Jul 11 '14 at 17:28 by bt001 111

Below are some of the salary components apart from basic salary which can be added to structure to minimize tax.

  1. House rent allowance: should be max 50% of basic salary for best optimization.
  2. Conveyance allowance : non-taxable up to 800 per month. No proofs/bills required to submit
  3. Children Education allowance: Per school going child 1200 per annum is non-taxable. Maximum for 2 children, so max 2400 per annum becomes non-taxable.
  4. Leave Travel allowance: 2 trips on a block of 4 years can be claimed and reimbursement will be non-taxable. There is no maximum limit.
  5. Medical Allowance : non-taxable up to 15000 per year on producing medical bills.
  6. Food Coupons - Non-taxable upto 50 Rs per meal. So a 22 working month and one meal per day would make Rs 1100 as non taxable. Sodexo or Accor ticket coupons may also be provided by employer for same.
  7. Periodical Journals: Some employers may provide component for buying magazines, journals and books as a part of knowledge enhancement for business growth. This part would become non taxable on providing original bills.
  8. Professional Development Allowance : If original bills are submitted to employer, this allowance may become non-taxable. Generally payment done towards any technical course fee, certification etc done to enhance professional knowledge can be reimbursed.
  9. Uniform/Dress Allowance: Some sections of employees mat get allowance for purchase of office dress/uniform. In such case, the component would become non-taxable.
  10. Telephone reimbursements - In some of the cases, companies may provide a component for telephone bills. Employees may provide actual phone usage bills to reimburse this component and make it non-taxable.
  11. Internet Expenses - Employer may also provide reimbursement of internet expenses and thus this would become non taxable.
  12. Car expense reimbursements - In case company provides component for this and employee use self owned car for official and personal purposes, Rs 1800 per month would be non-taxable on showing bills for fuel or can maintenance. This amount would be Rs 2400 in case car is more capacity than 1600cc.
  13. Driver salary - If employee pays driver salary for self owned or company owned car, Rs 900 per month may become non-taxable if employer provides component for it.
  14. Grade/Special/Management/Supplemementary Allowance: That’s general component in industry to complete CTC amount after putting 35-40% into basic and 20% in HRA. This is not an expense, but this head is kept just to put the rest of CTC amount into some component.
  15. Employer contribution of EPF/New pension scheme(NPS): Employer contribution does not become part of employee’s income and hence income tax is not payable on this part.

answered Jul 12 '14 at 03:17 by Pankaj Batra 5.2k320


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Asked: Jul 11 '14 at 17:28

Seen: 4,488 times

Last updated: Jul 12 '14 at 03:17