Frequent question: What components of salary are taxable in India?

On what components of salary are taxable?

Here are the fully taxable income components:

Basic Salary: the monthly compensation paid as salary, bonuses or commissions. City Compensatory Allowance: paid to offset the high cost of living in metro areas, the CCA is fully taxable as income to the employee. Incentives: reimbursement of personal expenses.

Which part of salary is not taxable?

The allowance which is paid to the employee by the employer for commuting to work from his/her residence is called conveyance allowance. The allowance is exempt from tax to the limit of INR 1600 per month. Any amount paid greater than INR 1600 will be taxable as per the Income Tax Act.

Is basic salary fully taxable?

Basic salary is fully taxable. Basic salary forms the core of the salary structure, constituting for 40-45% of the total CTC. Other salary components like Gratuity, Provident Fund and ESIC are determined according to the basic salary.

Is PF component of salary taxable?

Suppose an employer in a financial year contributes Rs 1 lakh to the superannuation fund, Rs 5 lakh in NPS and Rs 2 lakh in the EPF account. This is a total contribution of Rs 8 lakh, i.e., it exceeds the Rs 7.5 lakh tax-exempt limit by Rs 50,000. Thus, an employee is liable to pay tax on the excess contribution.

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How can I avoid paying tax on my salary?

How to Reduce Taxable Income

  1. Contribute significant amounts to retirement savings plans.
  2. Participate in employer sponsored savings accounts for child care and healthcare.
  3. Pay attention to tax credits like the child tax credit and the retirement savings contributions credit.
  4. Tax-loss harvest investments.

What is taxable component?

The taxable component of a member’s super interest is the total value of the member’s super interest less the value of the tax-free component. … The taxable component of a super benefit may consist of a taxed element and/or an untaxed element, depending on whether the benefit is paid from a taxed or untaxed source.

How can I get tax exempt from my salary?

Tax exemptions can be availed by investing in the following tools:

  1. Senior Citizen Savings Scheme (SCSS)
  2. Sukanya Samriddhi Yojana (SSY)
  3. National Pension Scheme (NPS)
  4. Public Provident Fund (PPF)
  5. National Pension Scheme (NPS)