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How to File Salary Income Tax with Benefits

Unlock the Power of Benefits: Your Ultimate Guide to Filing Salary Income Tax with Ease.

Salary Income Tax

All people start worrying about their tax returns as soon as the fiscal year comes to a close. The tax system, how income is calculated, and the slab rates must all be understood in order to make calculating the tax amount easier. There are five income heads-

  1. Salary
  2. House property
  3. Capital gains
  4. Business or profession
  5. Other sources

Salary income is the first category under which further components fall. Before you can determine the proper tax obligation, you must first grasp the elements of salary income. You must first comprehend the various elements of the pay slip in order to understand the salary. The retirement benefits deducted from the salary, the difference between the CTC and take-home pay, and finally the tax due must all be determined.

So let's start with the parts of the pay slip. These elements consist of the following:-

Basic Salary : One of the parts of your income that is listed in the salary breakdown or structure is your basic pay. Your take-home pay includes the total amount of your basic wage.

Dearness Allowance : Dearness allowance is an allowance which is allowed to you for factoring in inflation which increases the cost of living.

Housing rent allowance : You can utilize HRA to reduce your tax burden if you work and rent an apartment or a property. The amount of rent paid may be partially or entirely excluded from taxable income. When determining the HRA amount, you must adhere to the rules established by the income tax department.

Leave Travel Allowance : You can apply under LTA for a tax exemption for expenses incurred while travelling within India. This exemption is available for the trip's shortest distance. The expense of a spouse, children, and parents, if they are travelling together, is also included in the allowance claim. You must travel before filing for the exemption because you must present all the necessary travel-related documentation. LTA is permitted twice throughout a four-year period.

Bonus : "A sum of money added to a person's salary as a reward for good performance" is the definition of a bonus. Bonus is taxed under the following conditions:

  1. The bonus is taxable as of the date of receipt.
  2. In the year in which the bonus was received, it will be factored into the gross compensation.

Employees’ Provident Fund contributions : The Employees' Provident Fund is a social security programmer for salaried workers that the Government of India established. Under the programmer, the employer and employee each contribute 12 percent of their monthly basic income and dearness allowance to the fund (EPF). 8.55 percent of the interest on the whole amount is charged on the amount. According to the EPF ACT of 1952, all businesses with more than 20 employees are required to contribute to the PF amount. When you retire, the EPF contributions will have built up a retirement fund for you.

Standard deduction : In the 2018 budget, the standard deduction has taken the place of medical and conveyance allowances. You can now deduct INR 50,000 as a standard deduction from your gross salary income, lowering your taxable income.

Professional Tax : Similar to the income tax imposed by the Central Government, this tax is imposed by the State Government. The most that may be assessed is INR 2500. Typically, only the employer withholds this and deposits it with the state government.

Let's now clarify the distinction between take-home pay and CTC (Cost to Company). The firm may also be able to provide you other perks like meal discounts, pick-up and drop-off services, free lodging, gratuities, etc. These perks add up to the entire cost of hiring you for the business, which is referred to as the cost to the business. The monthly income, retirement benefits that are due upon retirement or leaving the company, and non-cash perks like free meals and transportation are all included in the CTC.

In contrast to CTC, the basic take home pay consists of your gross salary less any tax-free benefits you may be eligible for, such as HRA and LTA, as well as any income taxes you are responsible for paying.


The retirement benefits due to you are also included in the compensation. Let's examine their advantages. -

Retirement Benefits

The amount of money spent on retirement planning is given a significant tax benefit when determining how much tax is due on your wage income. Retirement benefits are what these benefits are known as. Let's go over each retirement perk in greater detail:

Leave Encashment Exemption : As an employee, you should constantly inquire about the company's leave encashment policy. The policy differs from company to firm; some let you carry over unused leave days while others give you the choice to cash them in. The amount you get is subject to taxation. In certain cases, no tax is applied to the sum you earn when you cash in the leaves that are not taken. These situations consist of the following:

  1. Employees of the Central and State Governments are not taxed on the leave encashment amount.
  2. For non-government employees, an exemption is permitted for the least amount possible from the list below:
  3. The ten months prior to retirement's average pay
  4. Received leave encashment money, so long as it's little more than INR 3 lakhs.
  5. the same amount as the earned leaves' salary
  6. The leave encashment received after subtracting the tax exemption in accordance with the aforementioned regulations would be the taxable amount.

Advance Salary : According to Section 89(1), you are excused from paying taxes if you received a family pension or a portion of your entire wage in advance.

VRS (Voluntary Retirement Scheme) : If certain requirements are met, an exemption is granted under section 10 (10C) on the sum received at the time of voluntary retirement. According to these requirements, the compensation amount must be received upon voluntary retirement, it cannot exceed INR 500000, the receipt must adhere to rule 2BA, and you must be a member of an authority that was established in accordance with the law. This exception is not available to employees who have already received benefits under section 89.

Pension : Any amount received as a pension is subject to taxation in the year it is received. Pensions are typically paid as annuities. Additionally, you have the option to convert one-third of your accrued pension into a lump sum. The annuity installments would be taxed in your hand at your tax bracket as they are paid, but the lump sum amount would be exempt from taxation under Section 10(10A).

Gratuity : A gratuity is a benefit provided by an employer to a retiring employee. You are eligible to get a gratuity from the employer after serving for five years. However, the payment is only provided at the time of retirement or resignation. Whether or not you are protected by the Gratuity Act affects how the tax is calculated. The amount a family member receives in the event of your death is not subject to tax.




The Tax Heaven

Mr.Vishwas Agarwal✍📊, a seasoned Chartered Accountant 📈💼 and the co-founder & CEO of THE TAX HEAVEN, brings 10 years of expertise in financial management and taxation. Specializing in ITR filing 📑🗃, GST returns 📈💼, and income tax advisory. He offers astute financial guidance and compliance solutions to individuals and businesses alike. Their passion for simplifying complex financial concepts into actionable insights empowers readers with valuable knowledge for informed decision-making. Through insightful blog content, he aims to demystify financial complexities, offering practical advice and tips to navigate the intricate world of finance and taxation.

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