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5 tax-smart ways to a better salary

July 10, 2008
Little can be done to save tax for salaried employees! This seems to be the predicament of most salaried individuals. While it might be true to some extent, things could be better if you at least try and structure your salary in a tax efficient way.

We have tried to bring out five basic aspects that need to be considered before you go about reducing tax that could be deducted from your salary.

Higher the better

Often employees desire to have maximum amount of salary in hand and accordingly structure their salary so as to have less of basic component, which leads to lower contribution on account of retirals such as provident fund (PF) etc.

On the contrary, we are of the opinion that by increasing the component of retirals you are possibly benefiting in two ways. The first being that the employer contributions to PF is tax free up to the extent of 12 per cent of your salary (basic + DA) and the second being enabling you to defer the tax payable from current timeframe to a future timeframe.

It might also be possible for you to achieve zero tax status on withdrawal of such amounts in future if you have completed five years of continuous employment (not specifically with the same employer).

Text: RelaxWithTax. Illustrations: Uttam Ghosh

Also read: Beating inflation: Increase your income


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