Every employee looks for a lucrative CTC or salary package, and they are becoming wise to the fact that a well-structured compensation package and a smartly-filed tax return can enable significant tax savings. Employers can help with that. Read on for 9 smart ways that employers can help employees save tax!
Ensure that employees PLAN at the beginning of the year!
While every employee should have an investment plan for the year, not many do. Employers can enforce this by ensuring employees provide a proposed investment plan at the start of the year. This can be followed by periodic check-ins and reminders by the employer so that employees set aside adequate funds every month towards this plan.
No one is an expert, so INFORM, ADVISE and GUIDE!
Many employees are unaware of the range of options available to them for tax-saving. Most wait for their paycheck at the end of the month, with no idea as to why so much tax was deducted, and even less insight on how to avoid it.
Employers can support employees by providing professional information and guidance to employees during the year so that they can make informed decisions on tax planning.
Flexible STRUCTURING of Salaries!
The optimal salary structure varies widely across employees. Some prefer a larger HRA component, while others may not need HRA, and would prefer to avail the Rent Paid deduction. Some may opt for a break up into various allowances, and others may prefer to have a higher basic component.
Employers should provide adequate flexibility to employees to define their structure based on what works best for them, and also assist them in selecting the optimal structure.
PF is the Key!
While many employees grumble about the PF deduction from their salaries, not many realise how lucrative a saving scheme it is. Even small amounts saved every month, with an added employer contribution, end up multiplying into lakhs or crores of rupees over a period of time – the returns are tax-free.
Employers should educate employees on the value of the PF deduction, even in cases where it is not mandatory. In the case of companies not registered for PF, the employer should guide employees on the PPF options available.
INSURE the Future!
Having adequate life and medical insurance is essential. Both types of insurance premiums are tax-deductible and enable tax savings, while also securing the employee’s future in case of unforeseen situations. An employer can arrange for a tie-up, or an in-house insurance agent to ensure the employees can opt for the optimal insurance plans.
VOUCHERS/COUPONS in place of Cash!
Employers can offer employees vouchers/coupons for meals and shopping, as a part of their cash salary. These vouchers/coupons enable employees to spend as they would with cash, but provide the added benefit of being non-taxable.
In addition, coffee, tea and snacks provided during office hours are tax exempt, along with food within Rs. 50 per meal! Hence employers can balance out a marginally lower cash compensation through coupons, enabling overall tax savings without compromising on income.
Car LEASE scheme from the company!
While certain larger corporates offer this scheme, it is still not very popular over India though it is a great way to save on tax. Under this scheme, the employer makes the car lease monthly payments on behalf of the employee, while the employee receives a lesser salary every month to that extent, thus reducing tax outgo.
Well-structured car leases often work out more lucrative for the employee than taking a loan from the bank, after adjusting for the tax savings.
LTA for those who Travel!
Most employers do not educate the employees of the LTA option for tax deduction which can be claimed twice every 4 years. So next time an employee packs their bags to go on a trip, the employer can remind the employee to save their travel bills, and make use of their LTA for tax savings.
ASSIST in filing returns!
Most employers provide limited support to employees to file their returns. As a result, many employees overlook possible opportunities for tax refunds, purely because they do not have the understanding nor the assistance. Employers can recommend or arrange for return filing utilities, workshops, etc., so that the employees are aware of how returns are supposed to be filed.
With these smart fixes available, employers should make tax planning more lucrative to employees, while employees now know exactly the kind of remedies to save tax!