Salary restructuring is the process of reorganising your Cost to Company (CTC) into components that maximise tax-free portions without changing your total pay. Done correctly, it is one of the most effective and completely legal tax reduction strategies available to salaried employees.

7 Components That Can Reduce Your Taxable Salary

  • 1. HRA (House Rent Allowance): If you live on rent, make this 40\u201350% of Basic Salary. Partially or fully exempt under old regime.
  • 2. LTA (Leave Travel Allowance): Tax-free for domestic travel twice in a 4-year block. Include this as a separate CTC component.
  • 3. Food Coupons / Meal Allowance: Up to \u20b926,400/year is tax-free (\u20b950 per meal \u00d7 2 meals \u00d7 22 working days \u00d7 12 months). Many employers offer this as Sodexo or Ticket Restaurant vouchers.
  • 4. Children\u2019s Education Allowance: \u20b9100/month per child (up to 2 children). Small amount but free money.
  • 5. Telephone Reimbursement: Actual mobile/broadband bills paid by employer are fully tax-free. Requires submission of bills monthly.
  • 6. Employer NPS Contribution: Up to 10% of Basic + DA is deductible under Section 80CCD(2)-the only 80C/80CCD benefit available even under the new tax regime.
  • 7. Professional Tax: Deductible from gross salary. State-mandated, but ensure your employer is deducting and showing it correctly in Form 16.

What Not to Increase

Special Allowance is fully taxable-it should be the last (residual) component in your CTC, not a large fixed amount.

How to Request Restructuring

  • Speak to your HR or payroll team in January or at the time of appraisal
  • Many employers allow a Flexible Benefits Plan (FBP) where you choose how to split CTC
  • Provide receipts to claim reimbursement-based components

Use the SaveTaxNow Salary Restructuring Tool to compute the exact tax saving from each component for your specific CTC.