In continuation of the last write-up on the subject, here are other options which can be applied to reduce taxes on Salary.

I – If a rent free furnished or unfurnished accommodation is provided by the employer at confessional rent, deduction u/s 80GG can be claimed

II – Tax on retirement benefits like gratuity, commuted pension, accumulated balance of an unrecognised fund is lower if they are paid in the beginning of the financial year, employer and thus employees should mutually plan their affairs in such a way that retirement, termination or resignation has minimal tax incidence.

III- Pension received in India by a non-resident assessee from abroad is taxable in India, thus the planning should be made in such a manner, so that the incidence of tax is minimal.

IV – An employee should take the benefit of relief available u/s 89 wherever possible. Relief can be claimed even in the case of a sum received from an unrecognised provident fund so far as it is attributable to the employer’s contribution and interest thereon. Although gratuity received during employment is not exempt from tax u/s 10(10), relief u/s 89 can be claimed. It should, however, be ensured that the relief is claimed only when it is beneficial.

V – As the perquisite in respect of residential telephone, providing use of computer/laptops, gift of moveable assets (other than computer, electronic items, car) by employer after using for 10 years or more, and free refreshments during office hours, are not taxable, employees can claim these benefits without any tax incidence on these.

VI – Medical allowances paid in cash is taxable, thus employees should go in for free medical facilities instead of a fixed medical allowance.

VII – Since the employer’s contribution towards a recognised provident fund is exempt from tax upto 12% of the salary, employer may give extra benefit to their employees by raising their contribution to 12% of salary without increasing any tax liability.

VIII – As the perquisite in respect of leave travel concession is not taxable in the hands of employees if certain conditions are satisfied, it should be ensured that the travel concession should be claimed to the maximum possible extent without attracting any incidence of tax.

IX – Since the term salary includes basic salary, bonus, commission, fees and all other taxable allowances for the purposes of valuation of perquisite in respect of rent free house, it would be advantageous if an employee goes in for perquisite rather than for taxable allowances. This will reduce valuation of rent free house on effect of this ingenuity will be that all the perquisites u/s 17(2)(iii) will not be taxable as the employee will be outside the mischief of section 17(2)(iii).

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Alok Patnia
Founder and Director at www.taxmantra.com