Taxable Salary

The salary slab for the year 2008-09

Upto Rs.1,50,000 is non taxable. For Women it is Rs.1,80,000 and for senior citizens it is Rs.2,25,000.
Next upto Rs.3,00,000 the tax is 10 per cent, i.e. 10 % for income between Rs.1,50,000 to Rs.3,00,000. For women and senoir citizens it is between Rs.1,80,000 to Rs.3,00,000 and Rs.2,25,000 to Rs.3,00,000 respectively.
For income higher than Rs.3,00,000 and upto Rs.5,00,000 it is 20 per cent.
Anything above that is taxable at the rate of 30 percent.

The first thing that anyone needs is to calculate the gross salary. Salary in India have different components, depending upon the nature of the company and the nature of the field of work. A marketing guy will have different salary components (more of variable) than a guy doing financial work. Some of the important components are HRA (House Rent Allowance), Medical reimbursements, conveyance allowance, etc.

Salary Structure:

1. Basic Rent: This is fully taxable

2. House Rent Allowance (HRA): According to the Income Tax Act, if you are receiving HRA and also paying house rent, in that case you can claim deductions from your gross salary by showing the rent receipts. But, the house should not be in the name of your kids, spouses or your own name.

While calculating your HRA exemptions, you should note that there are two categories for such exemptions- metro cities and non-metro cities. Exemptions in metro should not be more than 50 per cent of your Basic (it can include Dearness Allowance) and in the case of other cities it is 40 per cent.

HRA Calcultation:

1. 50 per cent of your basic salary (40 % per non-metro cities)
2. HRA received
3. Rent paid in excess of 10 per cent of salary.

The minimum of the three will be exempted from your gross salary. Suppose your basic salary is Rs.12000. HRA is Rs.6000 and you pay Rs.7000 as your rent.

HRA as per rules will be:
1.6000 into 12 months (or whatever is the actual) for a metro
2.6000 (actual received) into 12 months (or actual)
4. ((7000-(12000*0.1)) into 12 months (or actual)

The minimum of the three will be exempted.

3. Medical Reimbursements: Upto Rs.15,000 per year is exempted if you provide the bills.

4.Conveyance Allowance: Maximum of Rs.800 i.e. upto Rs.9600 per year is tax free for the conveyance. No bills are required for this amount.

5.Then, there are phone bills, leave travel allowance and employee stock options, on which you can claim deductions.

6. Provident Fund: Look into your salary, there will be Provident Fund component. If your salary includes PF then the whole amount on PF is tax free (Maximum limit is Rs.70,000 in a year). You can deduct the amount while calculating your taxable income.