The article talks about revamping your CTC to increase net pay. When it comes to computing wages, the Indian government does not have fixed rules for structuring the CTC, excluding statutory heads. These are Employee Provident Fund (EPF), Employees State Insurance, gratuity and bonus, where the rules suggest minimum contributions. Salary break-up is the company’s prerogative.
What constitutes CTC varies in each company. Every CTC structure has three main components i.e. basic, retirement benefits, allowances and reimbursements that do not vary. Some firms may or may not include variable payouts, perquisites, premium paid for group benefits such as health insurance in your CTC. Therefore, you should go through your salary structure and if required get it restructured.
The basic constitutes the biggest part of your salary. Excluding house rent allowance (HRA), every component is fully taxable. An efficient way to decrease tax liability is to cut basic pay and adjust it as perks or long-term benefits.
The article explains three ways to restructure your salary for the purpose of gaining maximum tax benefits. These are,
increase in-hand salary, optimise long-term savings and make tax saving investments. Vaibhav Sankla, Director, H&R Block India suggests that if you have an education loan and you are in your first job with basic pay more than Rs. 15,000, then you may consider opting out of the EPF and instead repay the loan.
The article points out that people staying with their family miss the benefit on HRA. They can claim a flat 30% of the annual rent as a deduction for maintenance expenses such as repairs or insurance irrespective of the actual incurred expenditure.
Source : Economic Times