Tax Benefit for Salaried Class


Food coupon benefits

The value of food coupons issued by the employer, redeemable only at eating joints, are exempt from tax as long as the value of the food coupons does not exceed Rs 50 per meal.

Self rent vs. Company lease

Valuation of Rent Free unfurnished accommodation

For a self lease, on the other hand, you can claim HRA exemption. The tax exemption on HRA is computed as the minimum of following three conditions:

  1. Actual HRA on your pay slip;
  2. 40-50% of your basic salary;
  3. The rent amount minus 10% of the salary.

HRA is calculated at 50% of salary for Mumbai, Kolkata, New Delhi or Chennai. In other cities, HRA is calculated at 40% of the salary.

In case of a company lease, the amount of rent paid by your employer is deducted from your salary and hence your taxable income reduces to that extent.

However, perquisite value of such accommodation is added to your taxable income. Perquisite value is the lower of

1) 15% of taxable salary excluding the value of perquisites; or

2) Actual rent paid by the company.

House Rent Allowance – Income Tax provisions

You have to calculate the net tax benefit under both the options to find which gives you a higher tax saving. “If you are saving more through your HRA claim, then it’s better to opt for a personal accommodation.

Car benefit

If your employer provides you with a car lease option, you should consider availing of the same as it would be a tax efficient option.

In such case, the EMI paid by your employer to the leasing company is deducted from your monthly salary resulting in reduction in your taxable income.

Further, reimbursement of expenses associated with the car (such as driver’s salary, fuel, repairs and maintenance) are also considered as non-taxable.

However, perquisite value of such facility is added to your taxable income. . Perquisite value is equal to Rs 1,800 per month if the cubic capacity of car is up to 1,600. For cars with higher cubic capacity, the perquisite value is Rs 2,400 per month. Further, Rs 900 per month is added if a chauffeur facility is also provided.