Your salary is more than just a monthly paycheck credited to your account. Understanding your salary is key to managing finances and saving on taxes. Here’s a breakdown of the salary components and allowances:
- Basic Salary: Fixed part of your pay, the base for calculating allowances.
- Dearness Allowance (DA): Covers inflation for government employees, fully taxable.
- Employer's Contribution to Pension: Employer's contribution to pension fund.
- Uncommuted Pension: Regular pension payments post-retirement, fully taxable.
- Commission: Additional earnings based on performance and it is fully taxable.
- Salary Advances: Salary paid in advance, taxed when received.
- Salary Arrears: Unpaid salary amount due to you from previous periods, paid in a later year.
- Other: Any other salary component not covered elsewhere.
- House Rent Allowance (HRA): If you stay at a rented accommodation, HRA exemption can be claimed based on rent and location.
- Leave Travel Allowance (LTA): Tax exemption for LTA can be claimed for certain domestic travel.
- Leave Encashment Allowance: Encashed unused leave; it is tax-exempt under specific conditions like retirement or termination.
- Gratuity: Received after at least 5 years of service, exempt up to ₹20 lakh.
- Commuted Pension: A lump-sum pension payment received at retirement, partially taxable.
- Other Allowance: Any other allowance not covered above.
Check out how to add your salary on Quicko here.
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