One needs to pay attention to this component as this helps make the pay more tax-efficient and impacts the take home pay of those at lower levels of pay strata. Up to R1600 is exempt from income tax every month. As this is an allowance, it is exempt from income tax up to a certain limit, provided you are actually paying house rent and furnishing the lease document or rental receipts.Ĭonveyance allowance: This allowance is paid to cover your work-related travel expenses. This component constitutes 10-35% of your basic and varies with your designation and role in your organisation. House rent allowance (HRA): It is mandatory to provide certain sum of money to employees under the HRA subhead. As far as income tax is concerned, pay means basic and dearness allowance combined together. This component will be 30-40% of your basic. Further, house rent allowance and provident fund are also linked to the basic pay.ĭearness allowance: It is an allowance which is paid to top up your basic in accordance with the prevailing inflation rate. As far as income tax is concerned, basic pay matters as it is taxable. At senior levels, it will be less and additional components such as performance based pay or target linked pay will be major components. This component tends to be higher for employees of junior levels. IDBI Bank buyer to get tax waiver on LIC stake as wellīasic: As the name suggests, it is the basic component of your salary and it constitutes 40-50% of your total pay.
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