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:
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 -