The Budget has proposed full tax rebate for those earning up to Rs.12 lakh a year. If you factor in the Rs.75,000 standard deduction, anybody earning up to Rs.12.75 lakh a year (Rs.1.06 lakh per month) will pay zero tax under the new tax regime. Nearly 6.3 crore of the total 8.75 crore individual taxpayers are in the new regime. Lured by the lower tax, another one crore taxpayers are expected to opt for it next year.The Budget proposals have changed the average taxpayer’s perception of the new tax regime. Some analysts have gone to the extent of saying that the old tax regime is dead. That is not entirely true though. The new tax regime does indeed look attractive, but tax can be lowered with a carefully crafted salary structure packed with taxefficient perks under the old regime. Apart from the ubiquitous house rent allowance, there are plenty of opportunities to reduce the tax outgo of an individual by restructuring the cost-to-company package.
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Every individual has unique financial needs and priorities. Some may want to spend on travelling, others may prioritise spending on gadgets, or focus on acquiring new skills. Even health freaks can get tax breaks if they sign up with a gym. A flexible benefit plan allows employees to customise their compensation by choosing perks that match their expense pattern and align with their financial goals. A well-structured flexi benefit plan can enhance loyalty and reduce turnover rates, leading to a more stable and engaged workforce. For companies, this minimises the expenses of recruiting and training new employees.
Despite these advantages, many corporates are not providing all the tax benefits available under tax laws. After the new tax regime has become the default option, not much effort is being made to educate employees on financial wellness. Employees are paying high taxes because of their employers’ inertia and poor understanding of tax rules.
Also read | These Sec 80C options can be good investments even without tax breaks in new tax regimeSome companies avoid offering too many benefits to employees because they believe it leads to additional paperwork. Keeping records is tedious and companies are wary about the tax compliance related to these perks. Here are a few tax-efficient perks that can lower the tax outgo of an individual under the old regime.
Tax savers under old tax regime
These eight components of salary can help save more than Rs.1.35 lakh in tax.
Fuel and travel expenses
If travelling by taxi for work, the entire amount can be reimbursed with no tax implication. If using a self-owned vehicle or one provided by your company for official purposes, you can claim the reimbursement of fuel and maintenance expenses. If the vehicle is also used for personal purposes, the perk has a taxable value of Rs.2,700 for cars of engines less than 1.6 litre and Rs.3,300 for bigger cars.
Driver salary
Senior executives are also given the option to hire a driver. The salary given to the driver has a nominal taxable value of Rs.900 per month, but can save a big chunk of your tax.
Leave travel allowance
Reimbursement of travel costs of your family during vacation is tax-free if claimed twice in a block of four years. LTA should be made part of CTC at the beginning of the year. You cannot opt for it later during the year or claim it while filing the tax return.
Moveable assets
Big savings are possible if the company offers to buy moveable assets for its employees. Under Section 17(2), gadgets and appliances bought in the name of the company and given to the employee for personal use are taxed at only 10% of the value. In the case of computers, there is no tax at all.
Telecom and newspapers
Internet and phone bills soared during the pandemic when people worked from home. Reimbursements of these expenses are tax-free in the hands of the employee, but you need to submit actual bills. Similarly, reimbursements of bills for newspapers and periodicals are tax-free if supported by actual bills.
Meal coupons
This is tax-free for up to Rs.50 per meal, which works out to around Rs.2,200 per month. Though this perk has been there for many years, it was not very widely used. The introduction of digital wallets has made it easier for employees to use this perk without having to keep a bill for every meal. For companies, too, the compliance has eased thanks to digital wallets.
Learning and fitness
Some companies are ready to foot the costs incurred on signing up with a gym, or online and offline courses that enhance the worker’s skills. These perks are tax-free subject to actual usage and submission of relevant documents.
SUDHIR KAUSHIK IS CEO AND FOUNDER OF TAXSPANNER, A ZAGGLE COMPANY.
