Tax-Considerations-in-India-Salary structure

Understanding Tax Considerations in Indian Salary

1. Tax Considerations in India Salary: New vs Old Regimes & HR’s Role in Tax-Light CTC Structures

2. When you hear "Payroll Taxes," what comes to mind? Options:  Boring Compliance My Take-Home Salary A Legal Minefield A Strategic HR Tool

3. Why Tax Planning Matters for Salaried Employees in India 1 Tax Dominance 2 Maximize Take-Home Pay 3 HR's Strategic Role

4. The Old Tax Regime: Familiar but Complex

5. The New Tax Regime: Simplicity with Trade-offs Introduced in 2020, this regime aims for simplicity with: Lower, simplified tax slab rates across income brackets. A trade-off: it strips away most common exemptions and deductions available in the old regime. Individuals have the flexibility to choose between the old and new regimes each financial year, depending on their financial situation.

6.   Side-by-Side Tax Slab Comparison: Old vs. New Regime

7. Key Differences Feature Old Regime New Regime Who Benefits? Deductions/Exemptions (HRA, 80C, 80D, etc.) ✅ Available ❌ Not Available Old:  People with high investments & expenses. Standard Deduction ₹ 50,000 ₹ 75,000 New:  Salaried individuals get a higher deduction. Tax Rebate (Income for Zero Tax) Up to  ₹ 5,00,000 Up to  ₹ 7,00,000 New:  Great for middle-income earners. Tax Slabs Fewer, steeper jumps (5% → 20%) More, gradual jumps (5%→10%→15%→20%) New:  Lower rates for incomes between ₹6-15 Lakhs. Best For People with large deductions (e.g., home loan interest, HRA, big investments). People with minimal deductions, simpler finances, or salaried individuals without major investments. Depends on individual situation.

8. Comparing New vs Old Regimes: Which Wins? Employee Earning ₹12 Lakh/Year Old Regime (with full exemptions): Tax liability approximately ₹1.5 lakh. New Regime (without exemptions): Tax liability approximately ₹1.3 lakh.

9. Recent HR Practices: Crafting Tax-Light CTC Structures Flexible Benefits Non-Taxable Perks Strategic Salary Structuring

10. The CTC Breakdown Challenge Scenario:   You are an HR manager. You need to make an offer to a candidate. The agreed CTC is ₹10,00,000. Your Task:   D esign a salary structure that is both attractive to the employee (maximizes take-home) and efficient for the company. Components you can use:   Basic Salary, HRA, Leave Travel Allowance (LTA), Special Allowances, Food Coupons, PF Contribution. Constraints: Basic Salary must be at least 40% of CTC for PF calculation. HRA is typically 50% of Basic if in metro city (requires rent receipts). LTA & Food Coupons are tax-exempt up to a limit.

11. Role of HR in Employee Tax Education & Compliance Tax Education Proof Assistance Payroll Collaboration

12. Visualizing Impact: Before & After Tax Planning Smart Tax Planning = Higher Take-Home Pay This chart illustrates the tangible benefits of strategic tax planning and HR's role. An employee earning ₹12 lakh per annum could potentially increase their take-home salary by ₹1 lakh through optimized CTC structures and informed regime choices.

13. Challenges & Opportunities Ahead Challenges Constant evolution of tax laws Balancing Act Opportunities Integration of digital tools Strategic partnerships

14. Conclusion: Empowering Young HRs for Tax-Savvy Leadership 1 Strategic Compensation 2 HR as a Strategic Partner 3 Continuous Adaptation

15. Title: Design Your Salary Instructions:  You have just been offered a job with a CTC of rs . 9,00,000. Using the components learned in class (Basic, HRA, LTA, Special Allowance, Food Coupons, PF), design your own salary structure. Your goals are: Ensure it is compliant (Basic >= 40% of CTC for PF). Maximize your annual take-home salary. Write a short note explaining your strategy and why you chose the specific amounts for HRA, LTA, etc.