Employee Tax Benefits

- A Ready Reckoner
PREFACE
Come April 2018, and all your employee salary structures are going to undergo an overhaul to accommodate the
Standard Deduction that Budget 2018-19 has reintroduced. Now your employees get a flat deduction of Rs 40,000
on their taxable salaries, in lieu of medical reimbursements and conveyance allowance.

The bittersweet deal here is that while a tonne of paperwork has been reduced for HR managers with these benefits
gone, two of the most well-received tax-saving components have been taken away from employees. Also, the
Standard Deduction does not imply more tax savings for them.

One of the key factors influencing employee engagement and retention is the kind of benefits available to
employees. NOW is the time to make salary packages more lucrative. We bring you a ready reckoner that gives you
an overview of the other tax-saving employee reimbursements you can add to your employees’ pay structures.
Take a moment to look at some of the most important employee reimbursements that can help you make salary
packages more appealing and increase employee take-home by as much as Rs 80,000 a year.

Now is the time to:

RETHINK REVISE RETAIN

employee benefits salary structures employees
Fuel reimbursements for company owned cars

What it is: Fuel reimbursements and driver salary reimbursements towards

a vehicle used wholly for official purposes by an employee

What it covers: Fuel, maintenance and driver’s salary for four wheelers

Docs required: Employer’s certificate on expense incurred, fuel bills and log book
of journeys taken

Benefit: Amount spent fully exempt of tax if vehicle is used only for official
purposes

Usage Max value of Monthly tax applicable

perquisite per month (Assuming 30% slab)

Engine capacity <1600cc >1600cc <1600cc >1600cc

Official purpose No cap No cap Exempt Exempt

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Fuel reimbursements for vehicles owned by
employees

What it is: Fuel reimbursements and driver salary reimbursement towards

vehicle used partly for official and partly for personal purposes by an
employee and their household members

What it covers: Fuel and maintenance towards four / two wheelers. Also driver’s
salary for four wheelers

Docs required: Only fuel bills to be submitted

Benefit: Tax exemption is capped at a predefined value. Expenses incurred

over and above are taxed as per applicable tax bracket

Usage Max tax exemption Monthly tax applicable (eg.

per month monthly expense Rs. 10k &
tax slab of 30%)

Engine capacity <1600cc >1600cc <1600cc >1600cc

Official & personal 2,700 3,300 2,190 2010

(In INR) (Added Rs.
900 driver’s salary)

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Communications reimbursements

What it is: Mobile reimbursements, broadband reimbursement and

other communications expenses incurred by an employee
on behalf of their employer, as part of work.

What it covers: Landline phone, mobile (postpaid, prepaid) and

internet/ data card connections

Max perquisite: No maximum limit mentioned by the Income Tax Act. Can
vary as per company policy

Doc required: Landline, mobile and internet bills, in the name of the
employee, to be submitted

Benefit: | Mobile phones and internet is extensively used by

employees across tax slabs and hence would be availed

| Savings for employees

Assuming avg Annual value Yearly tax saving

eligible limit of perquisite @30% slab

Rs. 2,500 / month Rs. 30,000 Rs. 9,000 p.a.

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Books & periodicals

What it is: Research allowance granted to employees in order to

encourage academic and other professional pursuits

What it covers: Magazines, book & periodicals

Max perquisite: No maximum limit mentioned by the Income Tax. Can

vary as per company policy

Doc required: Proof of purchase. Companies can decide as per their

policies which type of books & periodicals to be
reimbursed

Benefit: | Encourages employees to focus on enhancing knowledge

that would help them perform better

| Possible savings for employees

Assuming avg Annual value Yearly tax saving

eligible limit of perquisite @30% slab

Rs. 2,500 / month Rs. 30,000 Rs. 9,000 p.a.

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Asset / gadget reimbursements

What it is: Gadget reimbursements are for movable assets used only
by the employee, majorly for official purposes can be
claimed for tax exemption

What it covers: Laptop, computers, mobile phones, pen drives etc

Max perquisite: | Fully exempt - Laptop/ computer (no upper limit)

| 90% tax exempt - Other gadgets (incl mobile)

Doc required: Any invoices or bills for assets/ gadgets purchased to be in the
name of the organisation

Benefit: | Tax-saving advantage on purchase of mobile and computers that are

extensively used for official purpose

| Savings for employees

Assuming avg Annual value Yearly tax saving

eligible limit of perquisite @30% slab

Rs. 3,250 / month Rs. 39,000 Rs. 11,700 p.a.

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Leave travel allowance (LTA)

What it is: Travel concession for employees from their employer

for themselves and family for travel within India

What it covers: Domestic travel expenses for airplane, train, bus etc

Rules: | No maximum limit specified by Income Tax Act on LTA

| 2 journeys in a block of 4 years (Current block 2018–21)
upto 1 journey per calendar year
| Only to-and-fro travel expenses within India can be claimed
for travel, during official leave
| Can be claimed for self and dependents
| Cannot be claimed if employee is not a part of the trip

Doc required: Approved leave application along with travel tickets,

including proof of travel eg. boarding pass for air travel

Benefit: | Encourages employees to take leaves. Keeps them

productive and happy
| Savings for employees

Assuming avg Annual value Yearly tax saving

eligible limit of perquisite @30% slab

Rs. 5,500 / month Rs. 66,000 Rs. 19,800 p.a.

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