Many salary components are fully taxable and some are partially taxable as per the existing Taxation structure. Let us look at the tax applicable on salary components in details for clarity and better understanding.
Fully Taxable Salary components
The below given components of salary are fully taxable.
- Basic Salary is fully taxable and the amount can be fixed as specified in the Minimum Wages Act. Basic Salary is taken into consideration for the calculation of Provident Fund and Employee State Insurance (ESI). Basic Salary acts as one of the components for calculating Gratuity.
- Dearness Allowance (DA) is fully taxable and the amount is fixed as recommended in the Minimum Wages Act. Dearness Allowance (DA) is taken into consideration for the calculation of Provident Fund and Employee State Insurance (ESI). Basic Salary acts as one of the components for calculating Gratuity.
- Special Allowance – At company’s discretion. Varies from one company and the other
- Band Pay – At company’s discretion. Varies from one company and the other
- Bonus – At company’s discretion. Varies from one company and the other
- Over time – At company’s discretion. Varies from one company and the other
- Arrears – At company’s discretion. Varies from one company and the other
- Personal pay – At company’s discretion. Varies from one company and the other
- Food Allowance – At company’s discretion. Varies from one company and the other
- Furniture Allowance – At company’s discretion. Varies from one company and the other
- Shift allowance – At company’s discretion. Varies from one company and the other
Partially Taxable Salary components
The below given components of salary are partially taxable.
- Meal Coupons to a maximum extent of Rs, 26,400/- per year at the rate Rs. 2,200/- is exempted from tax.
- Medical Reimbursement to a maximum of Rs. 15000/- per annum at the rate Rs. 1,250/- per month. Employee State Insurance (ESI) is applicable on Medical Allowance.
- Telephone (Mobile) Allowance is purely based on the Internet and call usage charges by individual employees. The upper limit is at the discretion of Companies and may change on the basis of profile held b individuals. This is considered as reimbursement and is completely tax free
- Transport Allowance to a maximum of Rs. 1600/- per month
- Newspaper or Magazine Allowance to a maximum of Rs. 12,000/- per month
- Leave Travel Allowance (LTA) is applicable once in fixed periodicities as specified by the Act. For the purpose of tax calculation only travel bills of self, spouse and children are taken into account. Food and accommodation are excluded for taxation purposes.
- Children Education Allowance Rs. 100/- per month per child and Rs. 300/- Hostel Allowance per child – Subject to a maximum of 2 children
- Vehicle maintenance Allowance is offered both for Company owned car and self owned car. For all cars which are less than 1600 CC a maximum of Rs. 1800/- exemption per month can be claimed. For all cars which are above 1600 CC a maximum of Rs. 2400/- exemption per month can be claimed. In addition to the above, a maximum of Rs. 900/- is exempted from tax per month towards driver salary.
- Uniform Allowance to a maximum of Rs. 24000/- per year is exempted from tax
- House Rent Allowance (HRA) is one of the components under which tax exemption can be availed subject to certain conditions.
- By providing the PAN Card identity of your landlord if the annual rent you pay exceeds 1 Lakh
- If your landlord does not have a Pan Card, a written declaration from him or her acknowledging the rent receipt
- Tax exemption can be claimed for Home Loan as well as HRA together
