Corporate India is increasingly valuing talent. In a bid to attract the best to their fold, many companies compete with one another in offering high salary with attractive perks. Realising that income tax takes away a substantial chunk of the pay packet, and that individual needs differ, they are open to designing tax-smart salary packages.
Saving a rupee in tax means you have a rupee more to save, spend or invest as you wish. So, when negotiating or reviewing your salary package, you should choose perks which are both useful for you and your family, and which are also tax-smart.
This requires a basic understanding of taxes applicable to various perks. A basic rule to follow is to opt for those where the employer pays FBT (fringe benefit tax), not you. This minimizes the tax payable by both you and your employer -- what could be a better win-win than that?
Take, for instance, the case of a chauffeur with a salary of Rs 10,000 per month. If you pay the salary, you will be doing so out of your after-tax take home. This implies that ipso facto, you will be paying a tax of Rs 40,680 (= 33.9 per cent of Rs 120,000). If the employer pays the salary, the FBT works out only at Rs 7,416 ( = 30.9 per cent of 20 per cent of Rs 120,000) only!
Here is a check-list of 30 tax and perk benefits relating to salary that will help you work out a tax-smart salary package. Read on. . .
[Excerpt from Taxpayer to Taxsaver by A. N. Shanbhag and Sandeep Shanbhag, published by Vision Books.] (C) All rights reserved.
Image: Finance Minister P Chidambaram gestures during the Post-Budget press-conference, in New Delhi. | Photograph: Manan Vatsyayana/AFP/Getty Images
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