How To Save Tax On Your Variable Pay | The Lifeline Today
A big fat salary can get reduced manifold after taxation. One way to hold on to the money from slipping away is by getting your salary restructured to pay more in terms of allowances and perquisites. Reimbursements such as travel expense and telephone bill and contributions to PF and ESI are tax free. However, many companies indulge in making variable payments which are given out as bonuses and performance incentives. These are usually given out in the form of profit sharing, tangible gifts, incentives and financial support for higher education. How variable salary is taxed? The variable pay constitutes a significant part of the salary structure and is completely taxable in the hands of the employee, same as the fixed component. It is important for an employee to track the expected variable pay to ascertain the possible tax liability. Once you have got the estimates, here are some tax saving options you could explore to reduce your tax liability. Clear off debts First things first, if