Income Tax Calculation: Pay Zero Tax with More Than 12 Lakh CTC, Here's How

An individual with a taxable income of up to Rs. 12 lakh will be exempted from paying any tax. While this is good news for lakhs of tax-payers in this country under the new regime, what about those who earn more than Rs. 12 lakh per annum? Is there a way to rejig the salary structure so that the taxable income remains below 12 lakh? 

Harsh Bhuta, Partner of Bhuta Shah &Co., a tax consulting firm, revealed that it is indeed possible to do so. There are certain allowances in the Income Tax act that can help tax-payers to rejig their salary structure. These allowances are exempt from tax in the new tax regime if certain conditions are met. 

What are some reimbursements that are exempt under new regime? 

Here's a list of some of the allowances that can help a tax-payer in restructuring his salary structure and reduce taxable income. 

Conveyance Reimbursement: 

The Income Tax Act allows employees to reimburse expenses made by employees for performing his/her job. Conveyance reimbursement can be exempted if it is expended while an employee commutes to the work place. An employee is expected to submit bills to claim reimbursement. 

Transport allowance for specific employees: 

The Income Tax act allows transport allowance for specially-abled people. It is important to note that Transport allowance is different from conveyance reimbursement. Transport allowance is an allowance that will be given for traveling between residence and work. 

Telephone and mobile bills:

Usually, salaried employess can claim exemption when they reimburse telephone bills. It is expected that the telephone reimbursement must be reasonable, depending on employee's designation, roles, and responsibilities. Employees can rejig their salary structure to include telephone, internet, and mobile bills to claim reimbursement. This can help reduce their taxable salary to a certain extent. 

Car lease policy: 

Employer's car leasing policy can also help you reduce your taxable salary. Car leasing is when the employer provides a car for personal and office use.