Many organisation have flexi benefits components as part of their compensation package to enable the Employee to save tax.
I also wanted to implement but I have been challenged by my Peer who is a Plant HR Head and I am R&D HR Head.
He asks me to show the exact clause in the income tax act with the exact amount of flexi benefit permitted by IT !
Do any one know here which are the IT act which allows these to allocate as exemptions exactly with the said amount or any upper limit.
Fuel Maintenance for Car - 21600 PA for CC of engine with in 1.6 / 28800 PA CC of engine exceeding 1.6 CC
Driver's Salary - 10800
Telephone reimbursement - 24000 PA
Books and Periodicals - 12000 PA
Professional Development
From India, Madras
I also wanted to implement but I have been challenged by my Peer who is a Plant HR Head and I am R&D HR Head.
He asks me to show the exact clause in the income tax act with the exact amount of flexi benefit permitted by IT !
Do any one know here which are the IT act which allows these to allocate as exemptions exactly with the said amount or any upper limit.
Fuel Maintenance for Car - 21600 PA for CC of engine with in 1.6 / 28800 PA CC of engine exceeding 1.6 CC
Driver's Salary - 10800
Telephone reimbursement - 24000 PA
Books and Periodicals - 12000 PA
Professional Development
From India, Madras
Dear Raji,
You have a wrong notion or misconceived that flexi salary helps to save income Tax. Many companies in India adopted the Flexible Benefits Plan (FBP) in salary structure to facilitate employees in which they can modify components of CTC (Cost to Company).
But, the Income tax applies to entire income above the standard deduction with some % of investment in EPF, National Securities, FD & LIC premium and certain expenditure made by an employee on education loan, House building loan.
In order to understand well better consult a CA.
From India, Mumbai
588You have a wrong notion or misconceived that flexi salary helps to save income Tax. Many companies in India adopted the Flexible Benefits Plan (FBP) in salary structure to facilitate employees in which they can modify components of CTC (Cost to Company).
But, the Income tax applies to entire income above the standard deduction with some % of investment in EPF, National Securities, FD & LIC premium and certain expenditure made by an employee on education loan, House building loan.
In order to understand well better consult a CA.
From India, Mumbai
Thanks for your reply Sir.
In my previous organization this was advised by KPMG and as per their advice we allowed these flexi benefits to Employees
They used to allocate above benefits and get exemption from Tax if they produce bills as reimbursement.
This is still practiced.
As you said, after which other deductions and rebates take to lessen little burden to our tax.
From India, Madras
In my previous organization this was advised by KPMG and as per their advice we allowed these flexi benefits to Employees
They used to allocate above benefits and get exemption from Tax if they produce bills as reimbursement.
This is still practiced.
As you said, after which other deductions and rebates take to lessen little burden to our tax.
From India, Madras
I have a feeling that you misunderstood the concept of Flexi-pay.
The CTC remains the same, which is why the company believes it is 'fair' to all employees.
But it gives the employees the freedom to adjust their pay structure based on what is the best for them with reference to tax and other matters. Some companies also allow them to move part of the payment to a bullet / lumped payment.
From the tax point of view, the components do make a difference.
For example, some people want HRA because they claim it as a deduction from taxable salary. For others it is meaningless as HRA is tax free only if you are actually paying rent. If you can't product a proper rent receipt with PAN no of landlord, its taxable. So there are some who don't care for it. Also for those opting for the new Tax Regime, there are no deductions.
Secondly, they can claim reimbursements. For example, Mobile Bills, Petrol Bills, Food bills for entertainment. If these are 'reimbursements' rather than allowances, they are not taxed in Income tax.
The same holds true for professional development, reimbursement of drivers salary, etc. However, please remember that if this is an allowance, it is still taxable. The second point is whether the company will take the trouble of tracking these expense separately because they can not be paid with salary and the amount obviously can not be standard and fixed every month.
From India, Mumbai
The CTC remains the same, which is why the company believes it is 'fair' to all employees.
But it gives the employees the freedom to adjust their pay structure based on what is the best for them with reference to tax and other matters. Some companies also allow them to move part of the payment to a bullet / lumped payment.
From the tax point of view, the components do make a difference.
For example, some people want HRA because they claim it as a deduction from taxable salary. For others it is meaningless as HRA is tax free only if you are actually paying rent. If you can't product a proper rent receipt with PAN no of landlord, its taxable. So there are some who don't care for it. Also for those opting for the new Tax Regime, there are no deductions.
Secondly, they can claim reimbursements. For example, Mobile Bills, Petrol Bills, Food bills for entertainment. If these are 'reimbursements' rather than allowances, they are not taxed in Income tax.
The same holds true for professional development, reimbursement of drivers salary, etc. However, please remember that if this is an allowance, it is still taxable. The second point is whether the company will take the trouble of tracking these expense separately because they can not be paid with salary and the amount obviously can not be standard and fixed every month.
From India, Mumbai
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Thank you for the valuable advices.
I am also aware the Tax is calculated on entire CTC, but the above flexi components are tax saving opportunities if allocated.
So was my query. Under Sec 10 and Sec 17 of IT act these are mentioned.
Except car, there is no maximum threshold mentioned anywhere. Like what can be maximum cap for Books and Periodicals or Telephone reimbursement etc.
regards
Raji
From India, Madras
I am also aware the Tax is calculated on entire CTC, but the above flexi components are tax saving opportunities if allocated.
So was my query. Under Sec 10 and Sec 17 of IT act these are mentioned.
Except car, there is no maximum threshold mentioned anywhere. Like what can be maximum cap for Books and Periodicals or Telephone reimbursement etc.
regards
Raji
From India, Madras
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