Remuneration Planning

by Dr. V K Singhania

Maximize take-home pay and minimize tax outgo.

Introduction

When negotiating terms of employment with a prospective employee, a higher take hom e salary works in the company’s favour. A well-structured salary package which maximizes take-hom e pay and minimize tax outgo is better than a higher CTC to attract better talent.

Before taking a final cal l on a particular pay structure, consider employees’ long-term and short-term financial goals helps to retain talent. Modifying the tax structure can simultaneously impact the net take hom e and retirement corpus as some components of the package may not come to employees immediately and others may be either full taxable or tax-fre e.

Generally the CTC can be broadly divided in four components— basic, allowances, perquisites and retirement benefits/contributions. Each component is treated in a different way for tax purposes and can impact the tax liability. The workshop will discuss Taxes on salary, remuneration planning, perquisite taxation, taxation of retirement benefits under the old and new tax regime.

Course Content

Remuneration planning under different situations

• Remuneration planning to minimize employees’ tax liability.
• Restructuring of present remuneration plan keeping in view present and future tax liability of employees.
• Tax on different perquisites provided to employees (like – rent-free/concessional accommodation, car, driver, education, domestic servant, interest-free/concessional lo an, sweat equity shares, touring/travelling facility, gift, club facility, credi t card facility, meal vouchers, refreshments, use of movable assets, transfer of movable assets, medical facility, leav e travel concession).
• Tax-free perquisites.
• Tax planning devices – How to convert within leg al parameter a taxable perquisite into tax-free perquisite or perquisite taxable at concessional rate.
• Documentation required for including perquisites while calculating TDS 
• Documents needed from employees  for deductions as well as other income for proper computation.
• TDS and taxation of retirement benefits (gratuity, leave encashment, provident fund, pension and voluntary retirement).

TDS under section 194R

· Provisions of section 194R.

· Clarifications by CBDT on section 194R.

TDS under sections 194C and 194J

· Provisions of sections 194C and 194J.

· Court rulings and tax planning hints.

TDS under section 195

· Provisions of section 195 along with double taxation agreements.

· Remittance outside India and applicable procedure under income-tax regulations.