Salary Components

1. Basic- This is the fixed component of your pay and forms the basis for other components

2. House Rent Allowance [HRA]- This is another major component of salary. Salaried
individuals, who live in a rented house can claim house rent allowance or HRA against the
tax liabilities. Lower of the following can be claimed as HRA benefit:

- 40% of basic salary

- Rent paid-10% of basic salary
- Actual HRA received

3. Leave Travel Allowance [LTA]- Salaried employees can avail exemption for a trip within India
under LTA. The exemption is only for the shortest distance on a trip. This allowance can only
be claimed for a trip taken with your spouse, children, and parents, but not with other
relatives. This particular exemption is up to the actual expenses, therefore unless you actually
take the trip and incur these expenses, you cannot claim it. Submit the bills to your employer
to claim this exemption. It can be claimed twice in a block of four years.

4. Variable Pay

5. Contribution to PF- need to contribute a percentage of salary towards provident fund.

6. Standard Deduction- This deduction has replaced the conveyance allowance and medical
allowance. The employee can now claim a flat Rs. 40,000 deduction from the total income,
thereby reducing the tax outgo.

TDS on Salary
TDS is tax deducted at source. Your employer deducts a portion of your salary every month and pays
it to the Income Tax Department on your behalf. Based on your total salary for the whole year and
your investments in tax-saving products, your employer determines how much TDS has to be deducted
from your salary each month. For a salaried employee, TDS forms a major portion of an employee’s
income tax payment. Your employer will provide you with a TDS certificate called Form 16 typically
around June or July showing you how much tax was deducted each month.

Deductions & Exemptions

80C Investments- You can claim a deduction of maximum Rs. 1,50,000/- ,if you make specified
investments like-

LIC Premium, National Savings Certificate, Contribution to EPF also forms part of 80C deduction,
Tuition fees, ULIPs, Equity Linked Investment Scheme, PPF etc.

Home Loan Benefits

If you have taken a home loan, you can claim tax benefits under Section 80C. You can also claim the
benefit for interest paid on housing loan (upto Rs. 2 lakhs).It may be noted that you can claim either
HRA or interest on housing loan.

Section 80D- Mediclaim insurance can be claimed as deduction form gross income upto Rs. 25,000/-.