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 employee benefits REVISE salary structures RETAIN employees
Fuel reimbursements for company owned cars Fuel reimbursements and driver salary reimbursements towards a vehicle used wholly for official purposes by an employee 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 Amount spent fully exempt of tax if vehicle is used only for official purposes Usage Max value of perquisite per month Monthly tax applicable (Assuming 30% slab) Engine capacity <1600cc >1600cc <1600cc >1600cc Official purpose No cap No cap Exempt Exempt 3
Fuel reimbursements for vehicles owned by employees Fuel reimbursements and driver salary reimbursement towards vehicle used partly for official and partly for personal purposes by an employee and their household members Fuel and maintenance towards four / two wheelers. Also driver s salary for four wheelers Docs required: Only fuel bills to be submitted Tax exemption is capped at a predefined value. Expenses incurred over and above are taxed as per applicable tax bracket Usage Max tax exemption per month Monthly tax applicable (eg. monthly expense Rs. 10k & tax slab of 30%) Engine capacity <1600cc >1600cc <1600cc >1600cc Official & personal (In INR) (Added Rs. 900 driver s salary) 2,700 3,300 2,190 2010 4
Communications reimbursements Mobile reimbursements, broadband reimbursement and other communications expenses incurred by an employee on behalf of their employer, as part of work. 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 Mobile phones and internet is extensively used by employees across tax slabs and hence would be availed Savings for employees Assuming avg eligible limit Annual value of perquisite Yearly tax saving @30% slab Rs. 2,500 / month Rs. 30,000 Rs. 9,000 p.a. 5
Books & periodicals Research allowance granted to employees in order to encourage academic and other professional pursuits 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 Encourages employees to focus on enhancing knowledge that would help them perform better Possible savings for employees Assuming avg eligible limit Annual value of perquisite Yearly tax saving @30% slab Rs. 2,500 / month Rs. 30,000 Rs. 9,000 p.a. 6
Asset / gadget reimbursements Gadget reimbursements are for movable assets used only by the employee, majorly for official purposes can be claimed for tax exemption 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 Tax-saving advantage on purchase of mobile and computers that are extensively used for official purpose Savings for employees Assuming avg eligible limit Annual value of perquisite Yearly tax saving @30% slab Rs. 3,250 / month Rs. 39,000 Rs. 11,700 p.a. 7
Leave travel allowance (LTA) Travel concession for employees from their employer for themselves and family for travel within India 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 Encourages employees to take leaves. Keeps them productive and happy Savings for employees Assuming avg eligible limit Annual value of perquisite Yearly tax saving @30% slab Rs. 5,500 / month Rs. 66,000 Rs. 19,800 p.a. 8
Like our Ebook? Share it with colleagues For a personalized demo, write to us at hello@zeta.in