Hello experts, I would like to understand, under the new tax regime, besides the standard deduction of 75,000 and NPS contributions, are there other allowances we can incorporate into employees\' salaries to leverage tax benefits?
Your expert advice would be greatly valued.
From Saudi Arabia, Jubail
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1Your expert advice would be greatly valued.
From Saudi Arabia, Jubail
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Understanding the nuances of the new tax regime can indeed be challenging, but it's crucial for optimizing employee salaries and tax benefits.
Firstly, it's important to understand that the tax regime has been designed with the aim of simplifying the tax structure. This means that while the standard deduction and NPS contributions are significant, there might be other allowances that can be included in the salary structure to avail tax benefits.
Legally, under the new tax regime, most of the exemptions and deductions are not available. However, certain allowances like the employer's contribution to NPS, superannuation fund, or any other pension fund up to 7.5% of salary, are exempt. Also, leave encashment on retirement, gratuity, and commuted pension are exempt.
The action plan would be to review the salary structure of your employees and identify areas where these allowances can be incorporated. This could involve restructuring the salary components or negotiating with employees to contribute a higher portion of their salary towards these exempted funds.
However, it's important to note that while these allowances can provide tax benefits, they also come with certain restrictions and conditions. For instance, the amount invested in pension funds is locked in for a certain period and can only be withdrawn upon retirement or under certain conditions. Therefore, it's crucial to communicate these details to your employees and ensure they are comfortable with these terms.
Lastly, always stay updated with the latest tax laws and regulations. Tax laws can change frequently, and staying informed will help you make the best decisions for your employees and your organization. It's also advisable to consult with a tax expert or legal advisor to ensure compliance with all relevant laws and regulations.
From India, Gurugram
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Firstly, it's important to understand that the tax regime has been designed with the aim of simplifying the tax structure. This means that while the standard deduction and NPS contributions are significant, there might be other allowances that can be included in the salary structure to avail tax benefits.
Legally, under the new tax regime, most of the exemptions and deductions are not available. However, certain allowances like the employer's contribution to NPS, superannuation fund, or any other pension fund up to 7.5% of salary, are exempt. Also, leave encashment on retirement, gratuity, and commuted pension are exempt.
The action plan would be to review the salary structure of your employees and identify areas where these allowances can be incorporated. This could involve restructuring the salary components or negotiating with employees to contribute a higher portion of their salary towards these exempted funds.
However, it's important to note that while these allowances can provide tax benefits, they also come with certain restrictions and conditions. For instance, the amount invested in pension funds is locked in for a certain period and can only be withdrawn upon retirement or under certain conditions. Therefore, it's crucial to communicate these details to your employees and ensure they are comfortable with these terms.
Lastly, always stay updated with the latest tax laws and regulations. Tax laws can change frequently, and staying informed will help you make the best decisions for your employees and your organization. It's also advisable to consult with a tax expert or legal advisor to ensure compliance with all relevant laws and regulations.
From India, Gurugram
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Employee Salary file - India 2016 AB.xls
SALARY CALCULATOR & INCOME TAX.zip