Increase In hand Salary without changing CTC in India?

Increase in hand salary without changing CTC in India by claiming HRA, home loan, conveyance, medical, LTA, investment tax rebates. Cut income tax.

Written by Anil Gupta
  By Anil Gupta          Updated  30 Dec, 19


Looking to increase in hand salary when your company does not allow changing the cost to company (Also called salary package/CTC)?

Given the fixed amount of salary, the options are limited to a big chuck called Income tax. You should reduce the outgo of taxes as much as possible, within the lawful ways.

If you can play with various components included in your CTC, you can very well use them to your advantage.

Please note that there is a difference between the CTC amount and take home salary amount or so called in-hand salary. You cannot simply assume your monthly take home to be (Yearly CTC)/12.

What is In-Hand Salary?

In-Hand Salary = Monthly Gross Income – Income tax – Employee PF – Other deductions, if any

The two main options to reduce your taxes are (If you keep the CTC amount fixed):

  1. Restructuring the CTC components: Include maximum possible amounts of tax saving components like Medical allowance, Conveyance allowances etc. subsequently reducing the other no-tax rebate allowances in your flexible allowances basket.
  2. Making FULL use of tax saving components: Obviously, the only way a salaried person can increase his take home is to maximize his tax rebates and pay as less tax as possible.

    Reducing taxes is exactly what a businessman does to increase his profit. Income tax laws in India give ample of options for a businessman to save tax by allowing all the business expenses with no limits, to carry on his business.

    Salaried person also has some options but only to a certain extent. So, I would advise you to make FULL use of these options and take away more in your pocket.
How To Increase in hand salary Without Changing CTC In India

How To Increase Take Home Pay Without Changing CTC In India

Increase in hand salary with Salary

  1. Conveyance Allowance: Hmm..Can you drive to your office in INR 1600 per month given the soaring prices of fuel in our country? Well, Indian government feels that you can.

    They only allow so much without any bills. If your company allows you to submit bills and claim them as reimbursement, you are certainly lucky.

    In either case, please do ask you employer to include this component in your CTC, if its already not there.

    You are not required to furnish any bills/receipts to get this benefit to the extent of INR 19,200 per annum.
  2. House Rent Allowance (HRA): Use HRA to tax maximum possible rebate on your rent, that you are paying.

    HRA amount is a percentage of Basic salary (40-50% varies by employer).

    The tax rebate (which could be a big one, believe me) that you get is dependent on complex Income tax rules.

    Calculate how much tax rebate you can get with your rent here.

    Home owner’s use of this option is restricted and governed by complex tax laws.

    If you stay in your own house belonging to your parents, you can still claim HRA by paying the rent to your parents.

    Note that this rent (that you pay) would certainly be added to your parent’s taxable income.

    This trick is really beneficial if they don’t have any other source of income. You can certainly shave off good amount of tax liability from your shoulders, if you can do this.

    If you are claiming tax benefit on your home loan and looking to further reduce your income taxes, you can claim HRA benefit too.

    The only caveat is that you need to provide documents to prove that your own home (on which you have taken home loan) is not occupied by you. This is ONLY possible if it is far away (reasonable distance is 50 Kms) from your office (probably located in another city) and you are staying in a rented house close to your office.

  3. Medical Allowance: You are allowed to claim upto INR 15,000 as tax rebate for any expenses made on medical expenses in a year. This includes you dependents i.e. spouse, children and dependent parents.
  4. Telephone Allowance: Some companies do reimburse the telephone or mobile bills incurred by you. This amount becomes non-taxable for you on actual bill amount.

    Off-course, this would have been your expense from your after-tax income, if it was not reimbursed.
  5. Food Coupons: Meal coupons like Sodexho are meant to be spent on meals during office time.

    Income tax rules mentions meal allowance through meal vouchers can be provided for up-to Rs.50/- per meal during working hours.

    Assuming you can consume at-least two meals (breakfast and lunch or evening snacks and dinner), with the rate of Rs. 50/- per meal and Rs. 35/- for tea and snacks, the company can provide Rs. 135/- per working day as the maximum allowance to the employee.

    Get the maximum out of this allowance by opting 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, you can save huge amount of tax Rs. 42,120/- i.e. (Rs. 135/- x 26 days x 12 months) as per your tax slab.

  6. Make Full use of investments tax rebate: You are allowed to claim tax rebate when you invest money in long term savings like insurance policies, mutual funds etc.

    We would recommend to use it to its full limits for full year, if you can spare the money.
  7. Voluntary Provident Fund (VPF): Though this does not offer a direct increase in your in hand salary, it certainly reduces your tax and brings more money on your side.

    VPF is a voluntary amount that you contribute to your provident fund every month. This amount is fully tax exempted and hence reduces your taxable income.
  8. Leave Travel Allowance (LTA): You should submit your bills to claim tax benefit on a leisure travel with your family. This allowance is taxable if you do NOT travel or travel but do not claim. So, why miss the chance of saving tax?
  9. Claim tax benefit on Home loan: Did you know that you can reduce your taxable income upto INR 2.5 lakh on your home loan repayment? Yes, the principal amount is tax deductible up-to INR 1 lakh and loan interest up-to 1.5 lakh per annum (Yr. 2011-12). This is a substantial amount and you SHOULD provide the relevant proofs to claim the tax benefit.

Use this online take home calculator India to find out actual take home that you may get if you make changes to your components. The calculator also gives you suggestions on what could be done to further increase the take home pay based on your CTC structure and tax saving options.