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5 Tax Exempt Salary Components Research Team | Posted On Friday, August 16,2019, 01:06 PM

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5 Tax Exempt Salary Components



Take a look at your salary payslip. You will find the salary has a break-up of different components. So what is CTC and take-home salary? Simple, CTC or cost to company is the sum of all benefits offered by your company plus your salary.

Take a Look at What CTC Includes:

  • Salary you receive each month
  • Retirement benefits like PF and gratuity
  • Non-monetary benefits like office cab, medical insurance paid by the boss, free meals at office, even the mobile bills reimbursed by the Company.

So what is take-home salary? The take-home salary is: gross salary received each month minus exemptions like HRA and LTA minus income tax payable (This is calculated after considering the Section 80 Deductions).

Want to know more on Tax Planning? We at will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

5 Tax Exempt Salary  Components 

1. Employee Provident Fund

The EPF scheme is managed by Employees Provident Fund Organization (EPFO). You make a certain contribution towards the EPF Scheme. Your employer makes an equal contribution towards EPF Scheme.

You (employee) contribute 12% of basic salary + dearness allowance towards EPF scheme. This contribution enjoys tax deduction under Section 80C; up to Rs 1.5 Lakh a year. (Your contribution to EPF is fully tax-exempt up to Rs 1.5 Lakhs a year).

See Also: All You Must Know About Tax Planning

2. Leave Travel Allowance (LTA)

Leave Travel Allowance or LTA is tax free if your travelling expenses are reimbursed by the Company on submission of the bills/tickets to your employers. Employees are offered this concession to travel to any place in India with family. You get this tax exemption under Section 10(5).

You can claim this exemption on only 2 trips in a block of 4 years. The current block period is calendar year 2018 to 2021. The family is spouse, children, parents and siblings wholly dependent on you. Only travel expenses are covered. You cannot claim food bills and hotel stay.

3. Food Coupons and Meal Vouchers are Tax Exempt

Food coupons are plain vouchers given by Companies to employees to enjoy meals at convenience. SodexHo and Ticket Restaurant issue food coupons. Many Companies tie up with SodexHo and Ticket Restaurant to offer meal coupons as part of salary CTC.

Food coupons are tax-exempt and are not included in taxable salary. The money you save on tax; lands in your pocket and there’s more to spend.

See Also: What are the Steps Involved in Tax Planning?

As per income tax rules, meal allowance through meal vouchers are offered up to Rs 50 a meal during working hours. It’s assumed that you would consume 2 meals during working hours. (This could be breakfast, lunch, evening snacks or dinner). This is Rs 50*2 for 22 days a month. This works out to be Rs 2,200 a month or Rs 26,400 a year.

4. Children’s Education Allowance

The education allowance for children which you get from employer is tax-exempt up to Rs 100 a month or Rs 1,200 a year per child. You can also claim tuition fees paid for children’s education up to Rs 1.5 Lakhs a year under Section 80C.

You also get hostel expenditure allowance up to Rs 300 a month or Rs 3,600 a year per child for hostel accommodation. (These exemptions are limited to 2 children of the employee).

See Also: How To Reduce Income Tax In India?

5. Gift Vouchers

If the market price of the gift is Rs 5,000 or less; then the entire amount of the gift is tax-exempt in the employee hands. You collect the gifts the boss gives on your birthday or marriage anniversary and save tax.

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