Salary structure simplified

LTA gets the employee some tax benefit once in a block of two years and so the hullabaloo. 

But before you distribute LTA to staff like WhatsApp jokes, know this, that it's on you to validate that the employee hasn't claimed tax benefit on LTA in the running block already at previous employer. That employee actually consumed privilege (also called earned) leave for the period that the LTA is being claimed and lastly the travel so claimed actually did take place and the bills submitted are genuine. Now multiply that by the number of employees who'll claim LTA and you just discovered your liability of authorizing LTA claims of your organization. A few years down, when that employee isn't working with you anymore and the Tax Commissioner calls you over for Tea (things are changing), you might be asked to prove the authenticity of a particular bill of cab booking of an employee whose name you might not even recall.

I know you want to drop this component already from your structure. 

So while you relook at your salary structure, here are a few more items that you might want to reconsider.

1. Medical and Travel allowances that enjoy tax benefits till date may not get their deserved concession in the next financial year as per latest budget recommendations. There's a standard deduction on tax brought in just to help you do away with these.

2. There isn't anything else left that's tax efficient anymore. Paying tax seems to be most efficient clearly.

So here's the recommendation: Make is a simple and sweet Basic, HRA, DA and live happy ever after. Three isn't a good number? Make Basic inclusive of DA and get to Basic + HRA.

Worried of paying high Basic and it's impact on PF etc? Add "Special allowance" that has nothing special in it but plain bulk money. It's closest to safe haven that an employee can get.

So 3 ain't bad after all. Your new salary structure is Basic + HRA + Special allowance.

Now fire that compensation consultant.

Last parting gift to you: Send "Probation" to deep freeze, it's stale and vestigial, makes you look old.

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