Expert Girish Narang says that there are many components (parts) in the CTC (Cost to Company) given to the employees of a private company. These include Basic Pay, House Rent Allowance (HRA), Dearness Allowance (DA), Variable Pay, Imbursement, Leave Travel Allowance (LTA), Medical Allowance, Bonus, Provident Fund (PF) and Food Allowance etc. The components of CTC vary from company to company. The calculation of tax liability on these or on behalf of the company also varies. These can be assessed to tax depending on the nature of allowance and additional facilities received by the employee. Some of these are fully taxable, while some are fully exempt and some are partially exempt.
No discount is available on these
basic salary
It is a fixed amount, which is paid on the work done by the employees. It does not include bonuses, benefits or other compensation. This salary is fully taxable.
variable Pay
This part of CTC is taxable. It is given according to the performance of the employee.
Bonus
The bonus received by the employees is fully taxable. That is, if a company gives bonus to its employee, then it has to pay tax on it.
Gratuity
Tax is levied. However, on receipt of gratuity at the time of retirement, tax will be calculated on the basis of whether the company is covered under the Payment of Gratuity Act or not. If the company comes under this law, then the actual amount under section 10 (10) is Rs 20 lakh and after dividing 15 times the last salary by 26 and multiplying it by the number of years in the company, the amount comes to these Whichever is less of the three, you can claim tax exemption on it.
You can avail benefits by claiming here
HRA
Exemption up to a certain extent is available under section 10 (13A) of the Income Tax Act. Taxpayers can claim exemption on the actual HRA amount, 50% of salary in metro cities, 40% in other cities and rent paid in excess of 10% of salary, whichever is the lowest.
reimbursement
The amount received by the employees for official purposes is exempted under Section 10(14) of the Income Tax Act. However, for this the employees have to show this expense. Necessary bills and vouchers have to be paid.
LTA of Income Tax Law
One can claim exemption on Leave Travel Allowance under section 10(5), but, certain conditions have to be fulfilled. The taxpayer can claim exemption on domestic travel only if he has traveled by air. One can avail tax exemption on LTA only twice in four calendar years (2022-25).
Exemption will be given for travel done with family only. The family consists of spouse, children, dependent parents and siblings of the taxpayer. This exemption is not available for more than two children born after October 1, 1998.
Tax on company’s esop
ESOP (Employee Stock Option Plan) is an employee benefit plan. Through this, the employee gets a company equity stake, which is usually less than the fair market value of the shares. On this difference of price, the employees have to pay tax in the form of additional facilities under section 17(2)(6) of the Income Tax Act. AK Nigam, Director, BPN Fincap