The last quarter of the financial year 2023-24 has started. With this, the time has come to finalize the preparations regarding income tax for the financial year 2023-24 i.e. assessment year 2024-25. If you also want to save tax, then today we are going to tell you some useful solutions. These measures are for those taxpayers who are salaried.
What is CTC
Actually, any company calculates its employee's salary from CTC i.e. Cost-to-Company. . CTC is the amount that a company spends on its employees in a financial year. Salary structure is different in every company. CTC includes things like basic salary, house rent allowance (HRA), special allowance and flexi benefits. Many things in these help in saving tax.
3 main parts of CTC
There are broadly three parts in the CTC of a working person… First – Fixed Component, Second – – Reimbursement or Flexi Benefit and thirdly- Other Components. Fixed components usually include basic salary, HRA and special allowances. The share of basic salary in CTC is 40 to 50 percent. At the same time, special allowances are fully taxable. Generally, HRA is up to 50 percent of the basic salary, on which tax exemption is available.
Tax benefit on HRA
The condition for claiming House Rent Allowance (HRA) is that You get HRA from the company and you are paying the house rent. The calculation of discount depends on three things. These three things are – the amount received as HRA, 50 percent of basic salary + DA in metro city and 40 percent of basic + DA in non-metro city, which will be arrived at after deducting 10 percent of basic salary + DA from the actual amount of rent. The amount. Tax exemption will be given on the amount which is less among the three.
Tax benefit on flexi component
To reduce the taxable income of the employee, employers include several components in their salary. , known as flexi component or reimbursement. The company provides food allowance to employees during work hours or through pre-paid food vouchers such as Sodexo coupons. Under this, Rs 50 for one meal and Rs 100 for two meals a day are tax-free. For 22 days, a salary of Rs 2,200 per month and Rs 26,400 per year can be made tax-free.
Employees of many companies are provided internet and phone, books, newspapers and magazines, leave travel allowance. There is also an option to reimburse other expenses like (LTA), car lease, car maintenance, fuel expense, health club and driver salary. The employee can choose these by visiting the HR portal and save tax.
How does the reimbursement model work?
To claim reimbursement from the company, documents related to expenses such as bills are required. You have to give in the company. Tax can be saved on the actual amount of expenditure or the amount given under these heads in salary, whichever is less. The reimbursement amount is deducted from the salary income and thereby reduces both the income and the tax on it.
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