A CTC of an employee is derived with a host of factor such as gross salary, provident fund, tax slabs, compensations and allowances among others.

Most freshers want to make an early mark on their employer and strive for growth. But, majority of them find it difficult to understand their salary break-up. The CTC of an employee depends on many factors like gross salary, provident fund, tax slabs, compensations and allowances among others. This makes it tough to understand what taxes are being levied on salary. However, a bit of knowledge can help even freshers understand their salary structure and save taxes. Smriti Somani, Marketing Head, Zeta said, "But it’s always a struggle for freshers to make sense of the salary breakup that consists of CTC, total gross salary, tax-saving employee reimbursements and benefits. When we start out, we’re a bunch of inexperienced youngsters who take whatever we’ve been served in our salary packages at face value. But the moment of realization comes with the first paycheck. That’s when you have questions: How is the monthly salary less than what I expected? What are tax-saving employee reimbursements? Why should I opt for them?'

Somani helps find answers to these questions and more

What are flexible tax benefits for?
Companies offer various components in the CTC to retain and boost the morale of employees. While some salary components are fully taxable, others are exempted from taxes, only if you have a few pearls of wisdom in your pocket. These tax-saving employee reimbursements a.k.a flexible benefits can be claimed as tax-saving reimbursement through submission of bills. A typical flexible benefits plan can consist of all or some of the following components:

Does opting for reimbursements increase your take-home?
YES, they do! Now pin that to your soft board. Reimbursements are referred to as ‘benefits’ because employees get to save big on their income tax. If you do not opt for reimbursements, all the components in your salary package will become taxable and you end up paying more tax.

Joining your new job after March 2019? Here are some updates for you
The government has increased standard tax deduction for salaried persons. This figure has now been raised to Rs 50,000 from the earlier Rs 40,000(on your taxable income in lieu medical reimbursements and conveyance allowance). Additionally, the hike in gratuity limit from Rs. 10 lakh to Rs. 20 lakh in the next financial year indicates that the government is committed to boost self-sufficiency.

Watch Zee Business TV live streaming video below:

What happens when you do not claim your reimbursements?
Well, nothing much, apart from the fact that a few of your Saturday nights will be spent at home rather than partying at a club. Why? Because you just gave away your money to the government in tax deductions. The amount that is not claimed by you is marked unclaimed and Income Tax would be deducted on that amount.

Why should you check about tax-saving reimbursements before you join a company?
It is always advisable to join a company that offers you the choice of opting for employee reimbursements. By giving employees the freedom of designing their own reimbursement plan, a company is helping them save income tax as per government norms.

So, here’s to new beginnings for freshers. Be smart and opt for tax-saving employee reimbursements. All said and done, submitting claims and saving paper bills for months on end is an overwhelming task. If you’re not a fan of saving paper bills, go digital!