Benefiting from taxes

There are the usual standard tax-saving options available for every taxpayer and then there are certain benefits that are tax-efficient, being offered by employers to their employees. Many of these are rather uncommon and some of them are even considered grey. Based on my experience, I am sharing the list of options that you can check with your employer to make your salary more tax-efficient.

Uniform allowance: Tax laws provide for tax benefits on ‘uniform allowance’. In line with the changing times, some companies which require their employees to be dressed in strict formal attire provide their employees an ‘attire allowance’. This allowance is considered tax-free to the extent the employees submit the bills for purchase of such formal attire.

Health club allowance: Some companies offer health club allowance to their employees. This is considered as tax exempt to the extent that health club membership bills are submitted by the employees.

Reimbursement of telephone expenses: Reimbursement of telephone expenses, which is considered a tax-free perquisite, is also gaining popularity especially since many employers expect their employees to be available beyond office hours.

Gift vouchers: Some companies offer their employees to receive a part of their salary by way of gift vouchers for an amount less than Rs.5, 000. These vouchers are tax-free. A number of companies also offer meal vouchers of Rs.2, 400 per month. This too is exempt from tax.

Professional pursuit’s allowance: Allowances paid for encouraging academic, research and training pursuits in educational and research institutes are exempt from tax, and some employers offer an option to their employees to receive a part of their salary in the form of such allowance.

Contribution to NPS account: An increasing number of companies have started providing an option to their employees to receive a part of their salary in the form of company’s contribution to employees’ NPS account. These contributions, up to 10 per cent of the employee’s basic salary, are exempt from tax. Typically, the high-salary earners prefer to opt for this.

Car lease and reimbursement of car-related expenses: Another tax-saving salary component, which not many are aware of, is in the form of provision of company-leased car and reimbursement of car running expenses, including driver’s salary. Note that if the car is owned by the employee then the reimbursement of car running expenses hardly fetches any additional tax benefits. The tax savings for employees opting to purchase their new car through this scheme are significant and, therefore, employees find such schemes very attractive.

olmdesk@outlookindia.com