Medical reimbursements: Anually, upto Rs 15,000 is exempt from tax on the amount paid by an employer for medical expenditure incurred by an employee on his or his family members treatment. Hence, a couple can get an aggregate exemption of upto Rs 30,000 p.a., subject to submission of genuine bills.
LTC: Given to an employee for travel on leave with his family to any place in India, is exempt in respect of two journeys in a block of four calendar years. The amount exempted depends on the number of family members traveling, the mode of transport etc. The economy class air fare or the air-conditioned first class rail fare are some of the prescribed modes. Family includes the spouse, two children and any dependent. For a working couple, the individuals can claim the exemption alternate years and also for their dependent parents.
Motor Car: The use of employer-owned/ leased car for part official and personal use would result in a nominal perquisite value being taxed in the hands of the employee. For example, where the annual expenditure is Rs 3,00,000 to Rs 4,00,000 towards running and maintenance of the car, the perquisite value would be Rs 28,800/ Rs 21,600 annually (depending upon the cubic capacity of the vehicle). Hence, the tax impact would be Rs 8,900/Rs 6,675.
HRA: It is given to meet the housing cost of an employee. If a working couple resides in a rented house, and both pay the rent, the exemption can be claimed proportionately by both. Exemption is limited to the least of 40% of salary (50% in case the house is in Mumbai, Delhi, Kolkata or Chennai), actual HRA received and excess of rent paid over 10% of salary. Here salary comprises basic salary and DA. No exemption is given for residing in a house for which no rent is paid.
Kids education allowance: The allowance is exempt in the hands of employees up to Rs100 per month per child for a maximum of two children.
Conveyance allowance: Allowance granted to an employee to commute between his residence and office is exempt to the extent of Rs 800 per month.
Hence, instead of receiving Rs 15,00,000 p.a., one should bifurcate the salary (subject to employer policies) into cash salary and other allowances. The tax liability could be reduced from Rs 3,13,120 as envisaged above to Rs 80,670.
* The writer is partner, Tax and Regulatory, BSR and Co
* With inputs from Nishit Kapadia, senior manager, BSR & Co