CTC re-structuring to maximize in-Hand salary in India

Anil Gupta  25 Apr, 18      2  Finance

Use conveyance, medical, telephone, education, HRA, LTA, training, qualification allowances to pay for services without paying income tax. They can be part of your CTC and help you increase your in-hand salary.

CTC (Cost To Company) and its components define the amount of income tax rebates that we can avail as an employee.

There are 2 ways to increase your take home pay with the ultimate aim of reducing the total tax that goes out from your pocket:

  • Maximize income tax exemptions on investment and expenses.
  • Restructure your salary package to get more tax benefits.

Taxes are applicable on most aspects of our salary and we can do nothing about it except make use of the tax rebates to minimize the taxes as much as possible. We have created an app which analyzes your salary components (CTC components) and advises you on how you can effectively increase your take home pay by using the above two methods.

The tool uses an intuitive method and calculates your tax liability considering the various options you choose and guides you to what exactly can be done to minimize your taxes resulting in increased take home pay.

CTC re-structuring to increase in hand salary
CTC re-structuring to increase in hand salary

Let us consider a few components which can be used to reduce the tax liability on our salary income:-

Allowances/ Reimbursements

Allowances are normally paid irrespective of the employee actually incurring them. These are fully taxable if no bills are provided.

However, if the expenses are incurred actually and bills provided, they are not taxable up to a specified limit under each head.


For conveyance, up to Rs. 1600 per month is allowed as deduction without providing any bills. Add this component to your CTC if missing.

Medical Allowance

Bills have to be provided; up to Rs.15,000 per annum is allowed as deduction. This can be claimed for self, spouse, children, parents and siblings who are dependent on the employee.

Leave and Travel Allowance

2 trips in a block of 4 years is allowed and only travel within India can be claimed as deduction. It can be claimed for self, spouse, children, parents but only if the employee is travelling along with them. There is no maximum limit on this, but the un-utilized amount will be paid once the block is completed (after deducting taxes).

What all expenses can be claimed as LTA?.

Education Allowance:

An amount of up to Rs.2,400 per annum is tax-free.

Qualification Allowance:

An amount of Rs.24,000 per annum is tax-free.

Training Allowance:

An amount of up to Rs.14,000 per annum is tax-free if the employee provides relevant bills.

Telephone Allowance

An amount of Rs.12,000 per annum is tax free if the phone is used for official purposes and bills submitted.

HRA – House rent Allowance

House Rent Allowance can be claimed if one lives in a rented premises and the rent exceeds 10% of the salary. The actual HRA exempted from tax is least of the following:

You can find out the amount of Tax Exemption on your rent with this online Calculator. The calculator also guides you on the optimum rent that can help you save maximum tax with HRA.
Salary for the purpose of HRA means: Basic D.A (only if it is forming part of salary for retirement benefits) commission (if it’s a fixed % of sales turnover).