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
  Anil Gupta    Updated 3 Jun, 20

Looking to increase in hand salary when your company does not allow changing the cost to the 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.

A sample CTC for 7,85,000 per annum:

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#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.

The 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.

Increase in hand salary with Salary

#1 Conveyance Allowance

Can you drive to your office in INR 1600 per month given the soaring prices of fuel in our country? Well, the 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 your employer to include this component in your CTC, if it is 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.

Indian HRA Tax Calculator

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 a good amount of tax liability from your shoulders if you can do this.

#3 HRA and Home Loan Tax Exemption

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.

#4 Medical Allowance

You are allowed to claim up to INR 15,000 as a tax rebate for any expenses made on medical expenses in a year. This includes your dependents i.e. spouse, children, and dependent parents.

#5 Telephone Allowance

Some companies do reimburse the telephone or mobile bills incurred by you. This amount becomes non-taxable for you on the actual bill amount.

Off-course, this would have been your expense from your after-tax income, if it was not reimbursed.

#6 Food Coupons

Meal coupons like Sodexho are meant to be spent on meals during office time.

Income tax rules mention 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 a huge amount of tax Rs. 42,120/- i.e. (Rs. 135/- x 26 days x 12 months) as per your tax slab.

#7 Make Full use of investments tax rebate

You are allowed to claim tax rebates 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 the full year if you can spare the money.

#8 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.

#9 Leave Travel Allowance (LTA)

You should submit your bills to claim tax benefits on 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?

#10 Claim tax benefit on Home loan

The home loan principal and interest payment have the potential to reduce your tax by a huge amount. The principal is counted in the same kitty as Investment 80C but interest is separate and can substantially reduce your tax thereby increasing in-hand salary.

This is the tax-saving shown for home loan principal payment of 1 lakh and interest of 2 Lakh per annum:

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Do the calculation yourself by entering your salary details in take home calculator India.


Written by Anil Gupta
  Anil Gupta  
Mentor | Immigration and Finance Journalism | Humor | Opinions are my own