Incidence of tax in case of salaried employee can be minimized by keeping the following in mind:-
1. Instead of high basic salary one should opt for perquisites which are either exempt from tax or which in some cases, are valued at a lower amount than the actual expenditure. Though the CBDT has notified the rules for valuing various perks at its cost to the employer, yet in some cases it is still advisable to avail perks. Few examples are given below:
a. Rent free accommodation or HRA should be availed particularly in case of employees, who do not own a house/flat.
b. Expenses on purchases and maintenance of employee’s uniform can be paid/reimbursed by the employer and the same is not considered as perquisite u/s 10(14).
c. If any allowance is received for education and hostel stay of employee’s children from the employer, exemption can be claimed u/s 10(14).
d. The employees should avail the facility of motor car (as also its maintenance and running expenses) from the employer. The perquisite value is nominal considering actual expenses on car.
e. Reimbursement or payment of medical expenses and medical insurance may also be made by employer.
f. Leave travel concession should be availed.
2. One should make his investment in such assets, income from which result in Long term capital gain (LTCG) instead of regular accrual of taxable income. It may be pointed out that as per newly inserted provisions of section 10(38) the LTCG on sale of shares and units of equity oriented funds, on which Securities Transaction Tax (STT) is paid, are totally exempt from 1.10.2004.
In case of LTCG on transfer of other assets, one can avail exemption from capital gains by reinvesting in the manner prescribed u/s 54, 54EC, 54ED and 54F as the case may be. Even in case exemption is not availed, tax on LTCG on such other assets is payable only @ 20% after taking benefit of indexation.
3. One should make investments in such a manner so that the income thereon is either exempted u/s 10 or deduction is allowed under chapter VIA of the Income Tax Act. Particularly benefit of section 80CCC for contribution to pension fund, sec. 80D for medical insurance should be kept in mind.
4. One should also avail full/maximum benefit of –
a. deduction u/s 80C
b. deduction u/s 80CCF
c. senior citizens (who are 65 years or more) are entitled to higher exemption limit of Rs. 2,40,000/- for assessment year (AY) 2011-12 and senior citizens (who are 60 years & upto 79 years) are entitled to higher exemption limit of Rs. 2,50,000 for AY 2012-13.
d. From AY 2012-13 super senior citizens (who are 80 years or more) are entitled to higher exemption limit of Rs. 5,00,000/-
e. women taxpayers (those who are not senior citizens) are entitled to higher exemption limit of Rs. 1,90,000/- for AY 2011-12 as well as in AY 2012-13.
5. The general exemption limit has been enhanced to Rs. 1,60,000 for AY 2011-12 and Rs. 1,80,000 for AY 2012-13.
6. In case salary has been received in arrears or in advance, one can claim relief u/s 89(1)
Source: Tax Mantra
1. Instead of high basic salary one should opt for perquisites which are either exempt from tax or which in some cases, are valued at a lower amount than the actual expenditure. Though the CBDT has notified the rules for valuing various perks at its cost to the employer, yet in some cases it is still advisable to avail perks. Few examples are given below:
a. Rent free accommodation or HRA should be availed particularly in case of employees, who do not own a house/flat.
b. Expenses on purchases and maintenance of employee’s uniform can be paid/reimbursed by the employer and the same is not considered as perquisite u/s 10(14).
c. If any allowance is received for education and hostel stay of employee’s children from the employer, exemption can be claimed u/s 10(14).
d. The employees should avail the facility of motor car (as also its maintenance and running expenses) from the employer. The perquisite value is nominal considering actual expenses on car.
e. Reimbursement or payment of medical expenses and medical insurance may also be made by employer.
f. Leave travel concession should be availed.
2. One should make his investment in such assets, income from which result in Long term capital gain (LTCG) instead of regular accrual of taxable income. It may be pointed out that as per newly inserted provisions of section 10(38) the LTCG on sale of shares and units of equity oriented funds, on which Securities Transaction Tax (STT) is paid, are totally exempt from 1.10.2004.
In case of LTCG on transfer of other assets, one can avail exemption from capital gains by reinvesting in the manner prescribed u/s 54, 54EC, 54ED and 54F as the case may be. Even in case exemption is not availed, tax on LTCG on such other assets is payable only @ 20% after taking benefit of indexation.
3. One should make investments in such a manner so that the income thereon is either exempted u/s 10 or deduction is allowed under chapter VIA of the Income Tax Act. Particularly benefit of section 80CCC for contribution to pension fund, sec. 80D for medical insurance should be kept in mind.
4. One should also avail full/maximum benefit of –
a. deduction u/s 80C
b. deduction u/s 80CCF
c. senior citizens (who are 65 years or more) are entitled to higher exemption limit of Rs. 2,40,000/- for assessment year (AY) 2011-12 and senior citizens (who are 60 years & upto 79 years) are entitled to higher exemption limit of Rs. 2,50,000 for AY 2012-13.
d. From AY 2012-13 super senior citizens (who are 80 years or more) are entitled to higher exemption limit of Rs. 5,00,000/-
e. women taxpayers (those who are not senior citizens) are entitled to higher exemption limit of Rs. 1,90,000/- for AY 2011-12 as well as in AY 2012-13.
5. The general exemption limit has been enhanced to Rs. 1,60,000 for AY 2011-12 and Rs. 1,80,000 for AY 2012-13.
6. In case salary has been received in arrears or in advance, one can claim relief u/s 89(1)
Source: Tax Mantra
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