Salary Structure under Tax Planning Considerations in Respect of Salary Income :

The employer should not pay a consolidated amount as salary to the employee. If it is so paid, the entire amount of salary wi ll become taxable without any exemption. Therefore, he can split the same and pay it as basic salary plus various allowances and perquisites. For example, the employer should include allowances as part of the salary structure of the employees for which exemption can be claimed under Rule 2BB, eg. education allowance, uniform allowance, flight allowance etc. Fur ther, the employer can give such allowances like special compensatory allowance, border area allowance or remote area allowance or difficult area allowance or disturbed area allowance depending upon the posting of the employee. Some exemptions are available in respect of these allowances. In this connection, Rule 2BB specifies the exempt allowances. The employer has to make a careful study and fix the salary structure in such a manner that it will include allowances which are exempt.

The employer will get a deduction of all the above amounts paid in his assessment.