Income Tax

In order to view and approve the IT declarations made, follow the below steps,

Step 1: Go to payroll and then payroll admin. Here you would find the option “IT Declarations Approval”.

Step 2: Under the option, you would see the employees who have declared for the tax, the amount declared can also be viewed. In order to approve them, click on “Manage”.

Step 3: Once you click the ‘Manage” tab, you get the list of all the declarations made. Click on the employee name and then either approve them or reject them.

Allowance : A component in the structure that is paid out to an employee as an earning is termed as allowance. The breakup of the entire salary is mostly done on the basis of base components and allowances. The allowance can be medical allowance, conveyance allowance, etc. Mostly these components are tax exempted by the organisation or requires a document proof for it to be exempted.

Reimbursable Component : A component that is paid out only when the document proof of its usage is provided are known as reimbursable components. The various components that are considered as reimbursable components are medical reimbursements. Claiming for these components to the maximum value is to be done either every month or during the year end.

Recurring Deduction : A deductible component that would be deducted from the gross salary on a regular basis every month are set as recurring deductions. These can be deductions like insurance premium. For the insurance provided, the premium amount has to be deducted every month from the employee’ salary which is created as recurring deduction that automatically deducts the amount while running the payroll.

Unable to submit proof or make income tax declarations

To calculate TDS, employees are required to declare their investments and expenses that are either Tax Exempted (or) eligible for tax deductions under Income Tax Act. All the employees can make tax declaration on Keka by going to their ‘My Finances >> Manage Tax’ section.

In case the employees are not able to make income tax declarations or submit proof, please check if the existing, allows it. To review the settings for IT declarations, follow the steps below:

Step 1: Go to Settings >> Payroll >> My Finance Settings

Step 2: On the next screen, review the ‘IT Declarations’ & ‘IT Declaration Proof Submission’ section to confirm the last date for submission (which might be restricting the employees from making/updating declarations and uploading proofs) and make the changes accordingly.

Once last day has been extended for declaration/submission of proof, click on ‘Complete’ button, and the employees should be able to make/update declarations and upload proofs.

In case your employees are still not able to make declarations, write to support@keka.com.

Note: This topic keeps updating whenever a new payroll report is added to Keka

As of now, there are around 50 payroll reports available on Keka with many more coming soon.  To view the available reports, please go to Payroll >> Reports.

Few examples of payroll reports available on Keka:

Payroll:

• Current Salary Structure
• Current Salary With Bonus
• Employees Current CTC
• Expense Claim Report
• Financial Information
• Component break up for each employee (Pay Register)
• Contribution / Deduction Reconciliation Report
• Head Count Monthly Report
• Monthly Batch Payment – Bank Transfer, Cheque, Cash
• Payroll Journal Vouchers Report – Tally
• Salary Revision Report
• All Employee YTD Report

Income Tax:

• Annual Income Tax Report
• Annual HRA Reports
• Investment Declaration Summary Report
• Monthly Income Tax Statement

Provident Fund (PF):

• PF Remittance Report
• PF Monthly Electronic Return (ECR)
• PF Contribution card – Form 6A
• PF Joinee Statement – Form 5
• PF Exits Statement – Form 10
• PF Monthly Statement – Form 12A (Revised)
• Aadhar (UIDAI) submission Form
• PF Summary Report
• PF Arrear Report
• PF Admin Charges Report

Employees’ State Insurance (ESI):

• ESI Monthly Statement
• ESI Monthly Return (Electronic)
• Contribution Register (Form 5)
• ESI Overrides
• ESI Summary Report

Professional Tax (PT):

• PT Monthly Statement
• PT State Wise Report (Form 5)
• PT Override Report

If you are looking for any specific report, write to support@keka.com.

Submit claims for tax exempted allowances

Certain allowances are exempted at source, as per The Income Tax Act. The total tax liability of an individual of an employees can come down to a great extent if these allowances are included as part of salary structure.

In most of the cases, your employer might require you to submit bill at the end of financial year against these allowances to get tax exemption. In case you fail to provide bills for these allowances, the total allowance amount becomes taxable.

To submit claims/bills for tax exemptions on such salary allowances, follow the steps below:

Step 1: Go to My Finances >> Manage Tax >> Declaration

Step 2: Under ‘Declaration’, go to ‘Tax Saving Allowances’

Step 3: You can view list of all the allowances which are part of your salary and tax exemption (max. limit) associated with it. If you want to submit a claim/bill, click on ‘Edit’ link against the respective allowance.

Step 4: Enter the amount you want to declare for tax exemption, and click on ‘Upload’ link to upload proof of declaration. Once done click on ‘Save’ button to submit the declaration for approval from employer.

Once the declaration is accepted/rejected by your employer, you can view change in status. Only in case of accepted declarations, it will be considered for tax exemption.

Related:

What is meant by Tax exempted allowances?

An allowance in salary structure requires claim submission for tax exemption, how do I configure this?

Employees are unable to make Income Tax (IT) declarations and submit proofs, why?

How can employee make IT (Income Tax) declarations?

Where can I view and approve all the IT declaration made?

In case you are facing trouble when making declarations, write to support@keka.com.

Overriding TDS for an employee

There can be situations when an employee requests you to stop the TDS deduction or deduct less amount of TDS for selective few months. As an employer you have the flexibility to override the TDS amount for your employees on Keka.

To override the TDS amount, follow the steps below:

Step 1: Go to Payroll >> Payroll Admin >> Payroll & Income Tax > TDS Deduction Overrides

Step 2: On the screen that follows:

• For updating the TDS of individual employee, click on ‘Add Employee’ link, type and choose the employee for whom you wish to override TDS amount

On the pop-up that appears, you can view the Gross Salary and Regular TDS (per month) of the employee. Choose the period for which you want to do the TDS override and the override amount per month. Once done, click on ‘Save’ button to update the new TDS value for the employee.

IMPORTANT: Please note that the Override amount CANNOT be greater than the Regular TDS amount.

• For updating the TDS of multiple employees, click on ‘Import Income Tax Overrides’ link

From the screen that  follows, Download the ‘Excel Template’

Fill in the Excel file by choosing the period of override (dropdown) and override amount per month.

Once done, go back to the Upload screen, and click on ‘Upload Excel File’ to upload the override Excel file

Once the file is uploaded successfully, the new TDS amount for employees (updated override amount in Excel file) will come into effect as and when the ‘From Month’ (of override) approaches.

In case you are not able to override the TDS duration/amount, write to support@keka.com.

Configuring salary component amounts to be different/varying for employees

Even though the same salary structure is assigned to multiple employees in an organisation, chances are that the amount of components (Other than Basic & HRA) might vary from one employee to other.

For example, though 2 employees are having same salary structure (‘Basic = 40% of Gross’ & ‘HRA = 40% of Basic’), the components such as Mobile Reimbursement, Professional Allowance, Food Coupon, etc. might have different annual value/amount for both employees.

Since the value of components are based on the negotiation between employer and employee, this can vary from one employee to other, and thus needs to be updated on Keka for effectively calculating the amount when running payroll.

To make a salary component customisable and have different amount at employee level, follow the steps below:

Step 1: Go to Settings >> Payroll >> Salary Components & Structures

Step 2: Under ‘Salary Components & Structures’, go to ‘Recurring Components’ (Section 2) to view list of salary components.

You can either choose to make an existing salary component customisable at employee level, or configure this when creating a new salary component as well.

Step 3: To configure salary component to be customisable, click on ‘Edit’ link against the component

Step 4: On the pop-up that appears, select the option ‘Allow this component value to be customized and override at employee level ‘.

Once done, click on ‘Update’ button to save the settings for the respective component.

Related:

How do I override salary component value/amount for an employee?

In case you are having trouble with customizing salary component or over-riding its value, write to support@keka.com.

Configuring tax exempted allowance for proof submission

Certain allowances are exempted at source, as per The Income Tax Act. The total tax liability of an individual of an employees can come down to a great extent if these allowances are included as part of salary structure.

In most of the cases, employer might require you to submit bill at the end of financial year against these allowances to get tax exemption. In case you fail to provide bills for these allowances, the total allowance amount becomes taxable.

Here are examples of few allowances:

Medical Allowance/Reimbursement
Tax Exemption up to Rs 1,250 per month Rs 15,000 per annum

Conveyance/Transport allowance
Tax Exemption up to Rs 1,600 per month or 19,200 per annum

Leave Travel Allowance (LTA)/Leave Travel Concession (LTC )
Actual travel cost can be claimed for tax exemption twice in a block of four years (u/s. 10(5))

To configure proof submission for an allowance, follow the steps below:

Step 1: Go to Settings >> Payroll >> Salary Components & Structures

Step 2: Under ‘Salary Components & Structures’, go to ‘Recurring Components’ (Section 2) to view list of salary components.

You can either choose to make an existing salary component tax exempted (and requires proof submission), or configure this when creating a new salary component as well.

IMPORTANT: You will be able to change settings of any salary component only while it is not assigned to any existing salary structure.  In case the component (you wish to update) is already assigned to any salary structure, please delete it to make changes to settings and then re-assign it to the structure. The new settings will only be applicable for future payrolls and won’t affect any past/previous payroll data.

Step 3: To configure requirement of proof submission (for an allowance) for tax exemption, click on ‘Edit’ link against the component

Step 4: On the pop-up that appears, select the option ‘This component is Tax exempt (not taxable). Income tax Section ______‘ and its sub-section ‘Required submission of document proof (or bills) to claim for tax exemption‘.

Once done, click on ‘Update’ button to save the settings for the respective component.

Go to salary structure and re-assign the component. To learn how to assign component to a salary structure, see How do I create a salary structure and manage its components?

Related:

How do I submit claims for tax exemption on salary allowances (e.g. Medical Reimbursement, Conveyance, LTA etc.)?

In case you are having trouble configuring proof submission option for an allowance, write to support@keka.com.

Hiding a component from salary slip

There can be few salary components that an organisation is paying out to employees separately, which means, though these components can be part of Gross salary of employees, but they might not have a direct monetary value and are usually not part of Salary Slip.

One example of such component can be ‘Food coupons/cards’. Food coupons though can be part of your Gross salary, but might not be a direct earning (and thus doesn’t have a direct monetary value). Such components are usually paid out separately (in form of food coupons) and are not included in the salary slip of employees.

To hide a component from salary slip, follow the steps below:

Step 1: Go to Settings >> Payroll >> Salary Components & Structures

Step 2: Under ‘Salary Components & Structures’, go to ‘Recurring Components’ (Section 2) to view list of salary components.

You can either choose to hide an existing salary component from the payslip of employees, or configure this when creating a new salary component as well.

IMPORTANT: You will be able to change settings of any salary component only while it is not assigned to any existing salary structure.  In case the component (you wish to update) is already assigned to any salary structure, please delete it to make changes to settings and then re-assign it to the structure. The new settings will only be applicable for future payrolls and won’t affect any past/previous payroll data.

Step 3: To hide an existing component from the payslip of employees, click on ‘Edit’ link against the component

Step 4: On the pop-up that appears, select the option ‘This component is paid separately‘ and its sub-section ‘Hide component in Payslip (and exclude from gross earnings calculation in Payslip)‘.

Once done, click on ‘Update’ button to save the settings for the respective component.

Go to salary structure and re-assign the component. To learn how to assign component to a salary structure, see How do I create a salary structure and manage its components?

Related:

An allowance in salary structure requires claim submission for tax exemption, how do I configure this?

Can I configure a salary component to have different amount for employees having same salary structure?

In case you are having trouble hiding the component from payslips, write to support@keka.com.

Since the salary structure and its components can vary based on negotiation between employee and employer, it is quite possible that an employee, though falling under a particular salary range, has a different salary structure (where Basic, HRA and components included in salary are different). In such cases, even though a ‘Range Based Salary’ structure exists, it won’t work for this employee, given that the components and values differ.

To create ‘Custom Salary’ structure in such cases, follow the steps below:

Step 1: Go to Settings >> Payroll >> Custom Salary Structures

Step 2: On the next screen, click on ‘+ Add New Structure’ to add a new custom salary structure.

Step 3: Give the new salary structure a name and description for easy identification.  Use the right side section to edit value/formula for a component, delete component which are not part of this structure, or add a new component.

Once done, click on ‘Create’ button to add the new custom salary structure.

Related:

How do I create a salary structure and manage its components?

All the custom salary structures are visible as listing post creation.  In case, you wish to edit/update them at any point in time, click on ‘Edit Structure’ link.

Related:

How do I assign salary structure to my employees?

In case you are having trouble while creating custom salary structure, write to support@keka.com.

Changing Employees’ Salary Payment Mode

In situations where new employees join your organisation and don’t have a salary account yet, chances are that few initial months of salary is being paid out to them by cheque.  There can also be cases where the account information changed, or the mode of payment changed. In any such cases, it is required to update the salary payment mode details on Keka as soon as there has been a change, to avoid any issue that might arises due to this change.

To change the salary payment mode of an employee, please follow the steps below:

Step 1: Go to employee’s profile by typing the employee’s name in the search bar

Step 2: On employee’s profile, go to Finances >> Preferences tab

Step 3: Under Preference, go to ‘Salary Deposit’ section and you can view the current salary payment mode. Click on ‘Edit’ link if you wish to change the mode of payment or existing bank details (in case salary mode is Bank Transfer).

Step 4: On the new pop-up screen that appears, you can change the mode of payment, and add/edit account details (in case mode is Bank Transfer)

Once done with updating the salary payment mode details, click on ‘Update’ and this will add/update the information.

IMPORTANT: In case you want to update salary payment mode details for many employees (in bulk), write to support@keka.com and you will be provided with a custom link to do this.

Updating Employees’ Financial Information (PAN Information, Provident Fund, Aadhaar Information)

Though it is recommended to have all employees’ financial information with you during Keka setup/on-boarding, it is at times inevitable to have all these data at hand.  In such cases, it is recommended to update the financial information of employees as and when you have it available with you.

To update the financial information of an employee, please follow the steps below:

Step 1: Go to employee’s profile by typing the employee’s name in the search bar

Step 2: On employee’s profile, go to Finances >> Preferences tab

Step 3: Under Preference, you can find financial information sections (PAN Information, Provident Fund, Aadhaar Information) and option to edit them as well. Click on respective ‘Edit’ links to update the details.

Once done with updating the financial information, click on ‘Update’ button (for each section, i.e., PAN, PF and Aadhaar) and this will add/update the information for the employee.

IMPORTANT: In case you want to update financial information for many employees (in bulk), write to support@keka.com and you will be provided with a custom link to do this.

If you are having trouble updating the salary mode or financial details of your employees, write to support@keka.com.

Tax Exempted Allowances

Certain allowances are exempted at source, as per The Income Tax Act. The total tax liability of an individual of an employees can come down to a great extent if these allowances are included as part of salary structure. These components can be added to all salary structures (lower or higher CTC).

In most of the cases, your employer might require you to submit bill at the end of financial year against these allowances to get tax exemption. In case you fail to provide bills for these allowances, the total allowance amount becomes taxable.

Here are example of few allowances, along with exemption rules/limits:

House Rent Allowance (HRA)
Tax Exempted Amount will be least of the 3:

1. Actual HRA received
2. Location Based HRA (40% – If staying in Non-Metro, 50% – If staying in Metro)
3. Rent paid less 10% of basic salary

Medical Allowance/Reimbursement
Tax Exemption up to Rs 1,250 per month Rs 15,000 per annum

Conveyance/Transport allowance
Tax Exemption up to Rs 1,600 per month or 19,200 per annum

Leave Travel Allowance (LTA)/Leave Travel Concession (LTC )
Actual travel cost can be claimed for tax exemption twice in a block of four years (u/s. 10(5))

Uniform Allowance/Attire Allowance
Tax Exemption can be claimed on the actual expenditure incurred (u/s. 10(14))

Children’s Education Allowance
Tax Exemption up to Rs 100 per month per child, for up to 2 children, i.e. maximum of Rs. 200 per month

Children Hostel Allowance
Tax Exemption up to Rs 300 per month per child, for up to 2 children, i.e. maximum of Rs. 600 per month

Professional Pursuit/Research Allowance
Tax Exemption can be claimed on the actual expenditure incurred

Food Coupon/Meal Voucher
Tax Exemption claimed at Rs 50/meal for up to Rs 2,200 per month

Mobile Reimbursement/Telephone Reimbursement
Tax Exemption can be claimed on the actual expenditure incurred

Books & Periodicals
Tax Exemption can be claimed to the extent of actual expenditure towards purchase of books and periodicals

List of all benefits available to Salaried Persons »

In case you need help with creating a salary structure for your employees, write to support@keka.com.

ESI Contribution

Employees State Insurance provides cash and medical benefits to employees (and their families) who are earning a gross of Rs. 21,000 or less.

The contribution payable to the Employees State Insurance Corporation (ESIC) in respect of an employee shall comprise of employer’s contribution and employee’s contribution at a specified rate. The rates are revised from time to time.

Current Contribution Rate for ESI:
Employee Contribution = 1.75% of the wages paid/payable in respect of the employees in every wage period.
Employer’s Contribution = 4.75% of the wages paid/payable in respect of the employees in every wage period.

Employees in receipt of a daily average wage upto Rs.100/- are exempted from payment of contribution. Employers will however contribute their own share in respect of these employees.

For ESI calculation, the Gross salary comprises of all the monthly payable amounts such as Basic, Dearness Allowance, City Compensatory Allowance, HRA, Incentives, Attendance Bonus, Meal Allowance, etc. The Gross salary, however, does not include Annual Bonus, Retrenchment Compensation, Encashment of leave and gratuity.

Example of an ESI calculation:

Gross salary of employee = Rs 18,000/month

Employee ESI Contribution (@ 1.75%) = 1.75% of 18,000 = Rs 315

Employer ESI Contribution (@ 4.75%) = 4.75% of 18,000 = Rs 855

Total ESI Contribution = Rs 315 + Rs 855 = Rs 1170

In case you are facing issue with ESI calculation on Keka, write to support@keka.com.

The current maximum gross salary eligible for ESI is Rs 21,000 per month (w.e.f. 1st Jan. 2017). This means all industrial workers drawing a salary of up to Rs.21,000 will be eligible for health care – from primary to tertiary – at more than 1,500 clinics and hospitals run by the Employees’ State Insurance Corporation (ESIC) directly or indirectly.

Employees State Insurance Act has been passed to provide certain benefits to employees in case of sickness, maternity and employment injury and to make provisions for related matters. As the name suggests, it is basically an ‘insurance’ scheme i.e. employee gets benefits if he is sick or disabled.

Employees State Insurance provides cash and medical benefits to employees (and their families) who are earning a gross of Rs. 21,000 or less.

Employees State Insurance (E.S.I.) Scheme being contributory in nature, all the employees in the factories or establishments to which the Act applies shall be insured in a manner provided by the Act. The contribution payable to the Employees State Insurance Corporation (ESIC) in respect of an employee shall comprise of employer’s contribution and employee’s contribution at a specified rate. The rates are revised from time to time.

Current Contribution Rate for ESI:
Employee Contribution = 1.75% of the wages paid/payable in respect of the employees in every wage period.
Employer’s Contribution = 4.75% of the wages paid/payable in respect of the employees in every wage period.

Employees in receipt of a daily average wage upto Rs.100/- are exempted from payment of contribution. Employers will however contribute their own share in respect of these employees.

For ESI calculation, the Gross salary comprises of all the monthly payable amounts such as Basic, Dearness Allowance, City Compensatory Allowance, HRA, Incentives, Attendance Bonus, Meal Allowance, etc. The Gross salary, however, does not include annual bonus, retrenchment compensation, encashment of leave and gratuity.

Example of an ESI calculation:

Gross salary of employee = Rs 18,000/month

Employee ESI Contribution (@ 1.75%) = 1.75% of 18,000 = Rs 315

Employer ESI Contribution (@ 4.75%) = 4.75% of 18,000 = Rs 855

Total ESI Contribution = Rs 315 + Rs 855 = Rs 1170

Collection of Contribution:
An employer is liable to pay his contribution in respect of every employee and deduct employees contribution from wages bill and shall pay these contributions at the above specified rates to the Corporation within 21 days of the last day of the Calendar month in which the contributions fall due. The Corporation has authorized designated branches of the State Bank of India and some other banks to receive the payments on its behalf.

Contribution Period and Benefit Period:
There are two contribution periods each of six months duration and two corresponding benefit periods also of six months duration as under.

• For contribution period ‘1st April to 30th Sept’, the benefit period is ‘1st Jan of the following year to 30th June’
• For contribution period ‘1st Oct to 31st March of the year following’, the benefit period is ‘1st July to 31st December’

An employee can only avail ESI benefits after 9 months of joining employment and contributing to ESI. This is because the ‘Benefit Period’ starts 3 months after the end of ‘Contribution Period’, and any medical or maternity benefits can be availed during the benefit period only.

IMPORTANT: In case the salary goes above Rs 21,000 per month during the contribution period, the ESI would be calculated on the higher salary. For example, if the salary of an employee is raised to Rs 30,000 per month during the ESI contribution period, then the ESI would be calculated on Rs 30,000 instead of Rs 21,000.

Applicability of ESI:

Under Section 2(12) the Act is applicable to non-seasonal factories employing 10 or more persons.

Under Section 1(5) of the Act, the Scheme has been extended to shops, hotels, restaurants, cinemas including preview theatres, road-motor transport undertakings and newspaper establishments employing 10* or more persons.

Further under section 1(5) of the Act, the Scheme has been extended to Private Medical and Educational institutions employing 10* or more persons in certain States/UTs.

*Note: However in some States threshold limit for coverage of establishments is still 20 Employees of the aforesaid categories of factories and establishments. These State Governments/UTs are in the process of reducing the same.

The existing wage limit for coverage under the Act is Rs. 21,000/- per month ( w.e.f. 01/01/2017).

Areas Covered:
The ESI Scheme is being implemented area-wise by stages. The Scheme has already been implemented in different areas in the following States/Union Territories of Indian Union.
STATES – All the States except Manipur, Sikkim, Arunachal Pradesh and Mizoram.
UNION TERRITORIES – Delhi and Chandigarh

Visit ESIC website »

Related: How do I enable ESI for my employees on Keka?

In case you are having trouble setting up ESI for your employees, write to support@keka.com.

Salary Structure & Components

It is important to understand the various salary components that forms your salary structure. Most of the times when we negotiate terms of employment, we focus on getting a higher CTC without giving much attention to the compensation structure and components involved. Although higher CTC is important part of salary negotiation, but it doesn’t always means that a higher CTC will ensure a higher in-hand salary as well.

Thus, if you have the flexibility to decide the compensation structure, it is important to structure it efficiently to maximize net salary and minimize tax burden.

Components in any salary structure can be broadly divided into 5 segments:

1. Basic: This forms the base of salary and other components like HRA, PF, etc are calculated on this.
2. Allowances: House Rent Allowance (HRA), Dearness Allowance (DA), Conveyance Allowance, etc.
3. Variable Components: Performance Bonus, Sales Incentives, etc.
4. Contributions: Provident Fund (PF), Employees’ State Insurance (ESI), Statutory Bonus, etc.
5. Perquisites: Benefits received by a person as a result of his/her official position and are over and above the salary or wages.

Basic:

Basic is usually 40%-50% of the Gross Salary or CTC (Cost to Company).  Since the Basic salary is fully taxable, it is very crucial to decide what percentage of your Gross or CTC will form Basic salary. If the Basic is high, the tax liability will be high as well.
Also, other salary components such as HRA and PF, that can get you tax exemptions, are calculated based on your Basic salary.

It is recommended that employee with lower CTC should opt for a lower Basic salary since this is going to get them higher monthly net pay.

Allowances:

Certain allowances are exempted at source, as per The Income Tax Act. The total tax liability of an individual of an employees can come down to a great extent if these allowances are included as part of salary structure. These components can be added to all salary structures (lower or higher CTC).

In most of the cases, your employer might require you to submit bill at the end of financial year against these allowances to get tax exemption. In case you fail to provide bills for these allowances, the total allowance amount becomes taxable.

Here are example of few allowances, along with exemption rules/limits:

House Rent Allowance (HRA)
Tax Exempted Amount will be least of the 3:

1. Actual HRA received
2. Location Based HRA (40% – If staying in Non-Metro, 50% – If staying in Metro)
3. Rent paid less 10% of basic salary

Medical Allowance/Reimbursement
Tax Exemption up to Rs 1,250 per month Rs 15,000 per annum

Conveyance/Transport allowance
Tax Exemption up to Rs 1,600 per month or 19,200 per annum

Leave Travel Allowance (LTA)/Leave Travel Concession (LTC )
Actual travel cost can be claimed for tax exemption twice in a block of four years (u/s. 10(5))

Uniform Allowance/Attire Allowance
Tax Exemption can be claimed on the actual expenditure incurred (u/s. 10(14))

Children’s Education Allowance
Tax Exemption up to Rs 100 per month per child, for up to 2 children, i.e. maximum of Rs. 200 per month

Children Hostel Allowance
Tax Exemption up to Rs 300 per month per child, for up to 2 children, i.e. maximum of Rs. 600 per month

Professional Pursuit/Research Allowance
Tax Exemption can be claimed on the actual expenditure incurred

Food Coupon/Meal Voucher
Tax Exemption claimed at Rs 50/meal for up to Rs 2,200 per month

Mobile Reimbursement/Telephone Reimbursement
Tax Exemption can be claimed on the actual expenditure incurred

Books & Periodicals
Tax Exemption can be claimed to the extent of actual expenditure towards purchase of books and periodicals

List of all benefits available to Salaried Persons »

Variable Components:

Many companies include variable component as part of employee’s CTC, and pay it out (total or part of it) based on the performance of employee (a.k.a. Performance Bonus).  Since variable pay is dependent on company’s performance along with employee’s performance, companies are willing to pay employees if the business is profitable. Variable pay/Bonus is fully taxable.

Contributions:

Contributions such as Provident Fund & ESI  are made by employer for employees’ long term saving schemes and social benefits. Since these are long-term savings, they are not paid out to the employees immediately.  Contributions can affect an employee’s net salary package and thus it is important to have the right ratio of these contributions as part of your package.  Contributions do have some extent of tax exemptions associated to them.

Provident Fund: Employer makes a contribution (12% of Basic salary) against EPF (Employee’s Provident Fund). It is statutory obligation on part of the employer. Employee’s PF deduction is tax exempted u/s. 80C of income tax.
ESIC (Employee State Insurance Corporation): ESI is applicable for employees whose gross salary is less than Rs. 21,000. Employee needs to make a contribution of 1.75% of gross salary, whereas, employer needs to deposit 4.75% of gross salary.
Statutory Bonus: It is statutory bonus which is paid to employees whose basic is less than or equal to Rs 21,000. Bonus payable is capped at Rs 7,000 per month. Statutory Bonus is fully taxable.

Perquisites:

Perquisites are perks/benefits received by an employee over and above the salary.  For example, car or house provided by employer which is over and above person’s salary.  These perks/benefits might attract perquisite tax since these benefits are provided by employer over and above employee’s salary.  These perks/benefits or perquisites can be taxable or non-taxable depending upon their nature.

• Taxable Perquisites: Rent-free accommodation, Salary of servant employed by employee, Supply of gas, electricity or water for household purposes, ESOP/ Sweat Equity Shares, etc.
• Exempted Perquisites: Travel allowance, Interest free loan or Loan at concessional rate of interest, Computer or laptop provided for official use,  Refreshment provided during office hours, Use of health club and/or sports club, etc.

Perquisites taxable only by employees: Car owned by company but used by employee, Education facility, Service of domestic servant, etc.

List of all benefits available to Salaried Persons »

Use the above mentioned components smartly in your salary structure and you will be able to lower the tax liability and increase you net package.

Related:

What is meant by Tax exempted allowances?

What is Provident Fund (PF)?

What is ESI?

What is the current maximum gross salary eligible for ESI?

How is ‘total taxable income’ calculated?

How do I submit claims for tax exemption on salary allowances (e.g. Medical Allowance)?

What is Professional Tax (PT)?

What is the difference between Allowance, Reimbursable Allowance and Recurring Deduction?

What is Gratuity?

How do I assign benefits to employee?

In case you need help with creating a salary structure for your employees, write to support@keka.com.

Section 87A Tax Rebate for FY 2017-18

For  FY 2017-18, Section 87A provides income tax rebate to individuals earning income equal to or less than Rs. 3,50,000. The rebate is given on the Total tax payable by an individual. The rebate needs to be deducted from the Total Tax payable and not from Total Income on individual.

Rebate is limited to Rs. 2,500 under section 87A. This means that if the Total Tax payable is less than Rs. 2,500, this amount will be rebated and you don’t have to pay any tax.

Also note, that this rebate is applied on Total Tax before adding Education Cess of 3%.

Who can claim Tax rebate under section 87A?

Rebate can be claimed only by Resident Individuals given that their total income is equal to or less than Rs 3,50,000.