Tax Talks

Tax Query: How are the flexi pay components in my salary taxed?

My annual CTC package includes specific flexi pay components, apart from the fixed monthly payments. How are the flexi components beneficial, and how are they taxed?

An employer provides various flexi components, which an employee can claim based on the actual expenditure incurred by them. Such components include: 

  1. Broadband and telephone
  2. Fuel expenses and driver allowance
  3. Books/periodicals/self-learning expenses
  4. Meal coupons
  5. Gifts

Employees should submit the bills or invoices to their employer. The employer then grants the tax-exemption based on the documentary proof provided by the employees.

In case any of the components or allowances remain unclaimed at the end of the financial year, the employer pays the balance after deducting tax (TDS).

Also Read: Tax Query: Can I claim capital gains exemption on investments in bonds?

I had a transfer in employment from Chennai to another office of my company located in Hyderabad. For relocation, my employer provided a relocation allowance of Rs 1 lakh. The reimbursement includes airfare and transport expenses for my belongings, amongst other costs on relocation. Is the relocation allowance taxable?

A relocation allowance provided by your employer is tax-exempt to the extent of expenses incurred by you. The expenses include:

  1. The cost of travel and any amount paid in connection with the transfer.
  2. Charges for packing and transport of personal effects such as household items and other items of personal use of the employee.
  3. Ordinary daily expenses incurred by you during the journey or due to absence from the regular place of work.

You should maintain the documents, invoices and bills for the expenses and submit the same to your employer. The relocation allowance exceeding the costs is taxable as salary.

For any clarifications/feedback on the topic, please contact the writer at sweta.dugar@cleartax.in

Share

Recent Posts

Mutual Funds: SIP Inflows Breach Rs 19,000-Crore Mark for the First Time in February ’24

The systematic investment plan (SIP) contribution in February 2024 has crossed a new milestone. The monthly contribution tipped at Rs…

8 months ago

Income-Tax Return: A Brief Note on Annual Information Statement (AIS)

The Income-Tax (I-T) Department has directed taxpayers to access the Annual Information Statement (AIS) via the e-filing official portal and…

8 months ago

Mutual Funds: All About SIP and Market Fluctuations

Considering the vagaries of the stock market, investors often ponder over reevaluating their strategies. Whether to continue to remain invested…

8 months ago

Income-Tax Saving Through Strategic Life Insurance Planning

Financial planning is beyond just investing wisely to save on taxes; it's also related to protecting oneself and one's loved…

8 months ago

Income-Tax Return: Here’s a Note on Tax-Saving Avenues

A salaried individual earning up to Rs 5-15 lakh as net salary on an annual basis must first take stock…

8 months ago

A Quick Take on Equity-Linked Savings Scheme

Equity-linked savings schemes (ELSS), also referred to as tax-saving schemes, are equity funds that invest a significant portion of their…

8 months ago