Top three ways of increasing your take home pay

This article aims at discussing three easy and simple ways of adding a good amount of money to your pay packet each month even if you don't get a raise. I have seen that most of us are not well aware of how we can use the various components of a CTC to our advantage and hence are paying higher tax. Higher tax obviously means lower take home pay.

So, the idea is to lower the tax as much as you can and increase the money at your disposal.

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Courtesy: Am22Tech.com

1. House Rent Allowance (HRA)

This is one of the most juicy allowance that can save a huge amount of tax even if you do not stay on rent! Yes, that's true. Here is how...

Let's assume that you stay in your home which is owned by any other family member like your father/mother/wife etc. You can very well pay rent to them and claim the tax exemption from your office.

Note that legally, the amount of rent that you show as paid to your family member is taxable in his/her hands. Hence, the real benefit is achieved if the owner has no other income or the total income (including al other source + rent) does not exceed the exempted income.

HRA allowance's tax exemption is dependent on three income tax rules and are cleverly built up to give you the least benefit. You can play smart and get the maximum benefit that you can draw by using this calculator to find the rent amount that can help you get maximum tax rebate.

The HRA tax exempt amount is subtracted from the taxable income straightaway.

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2. Food coupons (Meal vouchers)

Food coupons are another tax heaven if you eat food and shop for groceries (fruits, vegetables included)! If you don't, this can't help.

Food vouchers are provided by companies to their employees and they are FULLY tax exempt. They are meant to take care of employee's daily meal needs. They are accepted at all good grocery shops like Food Bazaar (Big Bazaar). Most of the small grocery shop owners also accept them. I have seen a Maggi vendor sitting on pavement outside our office also accepting them!

They can effectively help you save approximately Rs 13,000 if you fall in the highest tax bracket of 30 per cent.

This is based on the assumption that you opt for Meal Vouchers @ Rs 135 (Rs 50 per meal x 2 + Rs 35 for tea and snacks) per working day, instead of cash in your salary. The tax you save on Rs 42,120, that is, (Rs 135 x 26 days x 12 months) would be somewhere around Rs 13,000.

So, even though you receive this amount of salary in the form of Food Coupons, you are not paying tax on this sum! If you do NOT avail food coupons, your company will pay you the amount the cash but after deducting tax as per your tax slab.

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3. HRA + Home loan

Last but not the least. If you own a house (on home loan) on your own name and still living in a rented house, you can get a double dip into your tax saving! Yes, you can get the tax exemption on home loan interest along with HRA (point 1 above).

As per tax laws, you can claim tax rebate under both categories at the same time if you have not occupied your OWN home yourself.

I know that it is difficult to convince your office's finance department for this scenario but they cannot deny it if you can prove that unoccupied home (and kept vacant) is far away from your office.

For example, if your office is in Gurgaon and your home is in Noida. Then you may rent a home in Gurgaon even though you have your own home in Noida. (Note that Gurgaon and Noida are at least 40 km apart in our case).

The other case is when you have RENTED out your own home and staying in another rented house yourself. This is a pretty straight forward case as you will be required to add the income from rented house (your own house) to your salary income. Your office's finance department won't have any issue in helping you claim both tax benefits in this case (Home loan tax rebate + HRA).

Home loan interest payment can be tax exempted upto Rs 1,50,000 as per 2011-12 tax slab.

Also, home loan principal repayment can be part of yearly Rs 1,00,000 tax exempted investments/savings.

If you have any questions, you are most welcome to ask in comments and I will try to answer as per my best knowledge.
And if you have missed out on any of the above allowances, go and claim them. You certainly are missing some good amount of money.

Enjoy.