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Income Tax efiling in India for FY 2023-24 (AY 2024-25)

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Save Income Tax on Salary Income

Understand Salary and its components - Basic, HRA, Travel Allowance, PF, Standard Deduction. Difference between CTC & take home salary. Tax exemptions & benefits.

Salary Income

As the financial year draws to a close all people begin to worry about their taxes. It is very important to know about the tax system, income calculation and slab levels to make tax calculations easier. There are five types of income -

  • Income from income
  • Income for real estate
  • Big profit income
  • Revenue for business or work
  • Revenue from other sources

Income from income is the primary source of income which is then subdivided into other components. You will first need to understand the portions of your income and then get the right tax credit. To understand the salary you must first understand the different parts of the pay slip. Then you need to find the difference between the CTC and take home income, retirement benefits deducted from the salary and not be able to calculate taxes.

So, let’s start with the pay slip components. These components include the following -

  • Basic Salary: This is considered to be the fixed amount of your basic payment slip that your employer promises you other than other salary benefits. The basic income is also used to calculate the contribution to the provident fund (EPF) as the contribution is expressed as part of the basic income.
  • Love Grant: Dearness allowance (DA) is a grant allowed for you compared to inflation to increase the cost of living.
  • Housing Benefit: If you are employed and live in an apartment or rented house you can ask the HRA to reduce your rent. There is an option to reduce or reduce the amount of rent payable on taxable income. You need to follow the guidelines set by the revenue department in calculating the HRA value.
  • Leave Travel Travel: Under LTA you can apply for tax exemption for expenses incurred while traveling within India. This release can be achieved for a short distance during the trip. The grant application also includes the expenses of the spouse, children and parents if they travel together. To get a release you need to provide all the travel related documents so you need to take a trip before applying. LTA is approved twice over a four-year period.
  • Bonus: A company announced bonus varies from one company to another. Generally, a performance bonus is awarded once or twice a year. The bonus falls under the tax slab as it is revenue. 100% of the total tax bonus.
  • Provident Fund Contributions: The Government of India has introduced a social security system for leading people where both the employee and the employer contribute 12% of their basic salary and monthly allowance. towards Provident Employee Fund (EPF) . The value attracts 8.55% interest on the value collected. All companies employing more than 20 employees are required to contribute to the PF value under the EPF ACT 1952. EPF donations build a retirement corporation for you.
  • General Arrest: Medical grants and transportation allowance have been replaced general catch in the 2018 budget. You can now apply for an INR 50000 with your full income as a normal deduction, thus reducing your taxable income.
  • Employment Tax : This tax is levied on the Provincial Government and is similar to the income tax levied by the Central Government. The maximum amount that can be charged is INR 2500. This is usually deducted by the employer only and submitted to the National Government.

Now let's understand the difference between CTC (Cost to Company) and home income. The company may offer you other benefits such as food coupons, pick-and-drop site, free rental accommodation, credit card, etc. These benefits include and make up the total cost of hiring a company known as corporate expenses. Thus, CTC will include monthly income, retirement benefits or retirement benefits and non-financial benefits such as free meals, free travel, etc.

Compared to CTC, the basic take-home payment will include the total amount you are paid after deducting free grants such as HRA, LTA, etc., and your income tax.

Earnings include retirement benefits paid for by you. Let's understand these benefits -

Retirement Benefits

In calculating your income tax, most tax benefits are calculated on the amount of money spent on retirement planning. These benefits are known as retirement benefits. Let's talk about all the benefits of retirement in detail:

  • Leave-Encashment Exemption: As an employee you should always ask the employer about leave the encashment policy. The policy varies from company to company, with some allowing you to continue your vacation days and others giving you the opportunity to earn vacation pay. The amount you earn falls below the taxable stable. There is a certain exemption where no tax is levied on the amount you earn by inserting uncut leaves. These situations include the following:
    • Central and regional government employees are not taxed on the amount of leave.
    • If for non-government employees exemptions are allowed at the following rates:
      1. Average salary 10 months before retirement
      2. Leave the amount of payment received as long as it is limited to INR 3 lakhs
      3. An amount equal to the income of the leaves obtained

    Taxable amount will be subsequent leave pay. to deduct tax exemptions using the rules set out above.

  • Advanced Income: Under Section 89 (1) tax exemptions are provided if you have received a portion of your gross income in advance, or have received a family pension in advance.
  • VRS (Voluntary Retirement Scheme): Under section 10 (10C), exemptions are granted on the amount earned at voluntary retirement if certain conditions are met. These criteria stipulate that the amount of compensation must be obtained from voluntary retirement, must not exceed INR 500000, the receipt must comply with rule 2BA, and you must be an official employed in accordance with certain rules. Employees who have made a profit under section 89 are not eligible for this type of exemption.
  • Pensions: Any pensionable income falls within the annual taxable income period. Pensions are usually paid in the form of annuities. You can also go with 1 / 3rd of the accumulated pension and earn a lump sum. This lump sum will not be taxed under Section 10 (10A) but pension payments will be taxed on your hand on your tax slab if paid.
  • Gratuity: Gratuity is the benefit given to an employer by his or her employee at the time of retirement. Once you have completed 5 years in the company you will be entitled to a loan from the employer. But the amount is only available at the time of resignation or retirement. The calculation of taxes is different and depends on whether you are covered under the Loans Act or not. The amount received by a family member in the event of your death is exempt from the tax slab.

Income Tax calculation

After you calculate the taxable income from your salary, you can calculate your tax liability. However, the following should be kept in mind while calculating tax - After calculating taxable income on your income , you can calculate your tax liability. However, the following should be kept in mind when calculating taxes -

  • Earnings income is not the only taxable income you have. There are various sources that also contribute to income other than income for example they can include income from property, shares, interest etc. all of this revenue is aggregated and tax revenue is levied based on revenue.
  • You also get deductions and exemptions from all taxable income calculated on all income heads. You must deduct the tax deduction and exemption to reach the taxable income.
  • Total taxable income will be taxed according to the slab prices provided -
    Revenue Tax Rate
    Up to INR 2,50,000 No Tax
    INR 2,50,000 - INR 5,00,000 5%
    INR 5,00,000 - INR 10,00,000 20%
    INR 10,00,000 and up 30%

    The table above applies to taxpayers up to 60 years of age. In the case of taxpayers between the ages of 60 and 80, the tax exemption limit is INR300000. For taxpayers over the age of 80 the tax-free limit is INR 500000. 4% of the total tax calculated is payable as health and education leave.

  • Tax deductions from the source of income: Every employer deducts a certain amount from your basic salary and pays it to the tax department on your behalf. The employer calculates the amount of tax on your basic income and the amount you invest, deducting TDS from your salary. The employer will provide you with a TDS certificate also known as Form 16 which contains all the details regarding TDS deductions. These deductions should be consolidated to determine the tax liability
  • FORM 16: Form 16, commonly referred to as a TDS certificate, contains all the information about tax deductions made by your employer on a monthly basis during the given financial year. The form is usually divided into two parts. Part 1 contains information about the employer such as name, address, Pan details etc. Section 2 contains details of the salary paid, deductions, other income etc.
  • Form 26AS: This form is provided by the Income Tax Department which contains information about the tax deducted on your behalf and the amount of tax paid. The form is available on the IT department's website.
  • Deductions: Section 80 and section 10 (10D) cover all deductions you may receive from all your taxable income. By using these deductions you can reduce your tax debt and thus reduce the amount of tax that a government has to pay.

Frequently asked questions

Pensions are included in your salary. Under the employment pension contract is also included tax under the heading of income. But when a pension is paid into any insurance product it means it is placed under the heading of income from other sources.

Perquisites are the benefits you are given because of your position. This amount is given next to the salary amount, for example, car, free rental accommodation etc. Depending on the type of goods required it is determined whether to pay taxes or not. Revenue Act 3 sets out the measurement of perquisites. There is no tax deductible on your salary when calculating the amount of tax on perquisites

Yes, prepayment is taxable.

Loss of household goods can be deducted from your income. But losses from business cannot be started.

You can enter into an agreement to rent a house with your parents when you pay their monthly rent. This way you will be able to take advantage of the rent to calculate your taxable income. However, your parents will need to indicate the amount of rent in their income file under the heading ‘income from other sources’. This amount is then taxed on your parents' returns.

Krishna Gopal Varshney

Krishna Gopal Varshney co-founder & CEO of Myitronline is amongst the top emerging startups of Asia and authorized ERI by the Income Tax Department. A dedicated and tireless Expert Service Provider for the clients seeking tax filing assistance and all other essential requirements associated with Business/Professional establishment. Connect to us and let us give the Best Support to make you a Success. ”

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