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Enjoying 'zero tax' sops on pay package of Rs 4 lakh, Difficult to believe, but that is true!

As a salaried taxpayer, you can structure your annual pay package of up to Rs 4,00,000 on a zero tax basis. You must endeavour to negotiate your pay package in a manner that the same can include maximum possible tax-free allowances and perquisites. This would ensure that you are able to take maximum take-home pay per month with the minimum deduction of tax. Here is an illustrated pay package under which the allocation of your salary, allowances and perquisites could be structured as under: Basic and DA of Rs 2,50,000 On the presumption that you are paying annual house rent of Rs 60,000, you can receive and claim House Rent Allowance of Rs 35,000 (being the amount in excess of 10% of your Basic and DA) as exempt under Section 10 (13A). Transport Allowance of Rs 800 per month for meeting to and fro expenses from your home to office. Annually Rs 9,600 can also be claimed by you as exempt under Section 10 (14). Conveyance Allowance of Rs 2,000 per month for discharging your official duties. Annually Rs 24,000 can be claimed by you as exempt under Section 10 (14). Uniform Allowance of an annual amount of Rs 10,000 towards purchase and Rs 500 per month (annual Rs 6,000) to meet the expenses for washing and maintenance of uniform. Thus, annually Rs 16,000 can be claimed by you as exempt under Section 10 (14). On the basis of your two children being educated at school or college, Children’s Education Allowance for each child at Rs 100 per month can be claimed exempt by you under Section 10 (14) at Rs 2,400 annually. Reimbursement of medical expenses of up to Rs 15,000 annually can be claimed exempt by you under Section 17 (2). Food coupons or paid vouchers provided by your employer being treated as

exempt perks (not liable to FBT also), such coupons for a value of Rs 2,500 per month (annually Rs 30,000) can be planned under the package and claimed exempt. Based on the assumption that Leave Travel Concession of Rs 18,000 is paid annually to you, the same can be claimed exempt under Section 10 (5), twice in a block of four years. Actual exemption can be stretched even further! In the above case, the various allowances and perquisites to the extent of Rs 1,50,000 as shown herein above would be exempt, leaving your taxable salary at Rs 2,50,000 out of the total pay package of Rs 4,00,000. You can plan appropriate investments or allocations by way of contribution to PF or PPF, payment of Life Insurance Premium, etc, up to Rs 1,00,000, which are eligible for deduction under Section 80 C and thus ensure that your Total Income stands reduced to Rs 1,50,000. This being within the basic exemption limit, the income-tax payable thereon would work out to ‘nil.’ You can thus effectively enjoy a ‘Zero Tax Status’ in respect of your total pay package of Rs 4,00,000.Depending on the facts of your case, the nature and extent of exemption of some allowances such as HRA, LTC, etc, could vary and would call for appropriate review. In case you are not paying any house rent, you could have possibly invested in a house of your own and be entitled to claim interest on housing loan up to Rs 1,50,000 as a special deduction under Section 24, which would enable you to stretch your actual tax exemption much beyond Rs 4 lakh! (The writer is a Ahmedabad based tax consultant)