The regular payment made by the employer to the employee for the work is called the salary.
Basic Salary: It is the employee’s basic income and is around 40%-50% of the total salary. The employer pays the employee for his skill, experience, and qualifications. The basic salary is a fixed component of the CTC (Cost To Company) package.
House Rent Allowance (HRA): It is the component of the salary offered by the employer to the employees, who reside in rented accommodation. The house rent allowance or HRA is partially or fully exempt from taxes under Section 10(13A) of the Income Tax Act. However, HRA is fully taxable if you don’t live in rented accommodation.
Leave Travel Allowance (LTA): The employer gives an allowance to the employee for travel expenses called the leave travel allowance. Employees must submit proof of travel to claim the allowance. A salaried employee can claim the LTA exemption under Section 10(5) of the Income Tax Act.
Special Allowance: The component in your salary structure called the special allowance is fully taxable in your salary.Bonus: The employer may pay a performance incentive to the employee called the bonus. It is a part of the gross salary and is fully taxable in the hands of the employee.
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Employee contribution to the provident fund: Both the employer and the employee contribute 12% of the employee’s basic salary each month, to the EPF or employee provident fund. The contribution made by the employee towards the EPF is available for a deduction under Section 80C of the Income Tax Act, 1961.
Professional Tax: Professional tax is the tax on employment levied by the state. The state can charge the maximum amount of Rs 2,500 as a professional tax in a financial year.
