Understanding salary components and allowances

Your salary is more than just a monthly paycheck credited to your account. Understanding your salary is key to managing finances and saving on taxes. Here’s a breakdown of the salary components and allowances:

• Basic Salary: Fixed part of your pay, the base for calculating allowances.
  
  
• Dearness Allowance (DA): Covers inflation for government employees, fully taxable.
  
  
• Employer's Contribution to Pension: Employer's contribution to pension fund.
  
  
• Uncommuted Pension: Regular pension payments post-retirement, fully taxable.
  
  
• Commission: Additional earnings based on performance and it is fully taxable.
  
  
• Salary Advances: Salary paid in advance, taxed when received.
  
  
• Salary Arrears: Unpaid salary amount due to you from previous periods, paid in a later year.
  
  
• Other: Any other salary component not covered elsewhere.
  
  
• House Rent Allowance (HRA): If you stay at a rented accommodation, HRA exemption can be claimed based on rent and location.
  
  
• Leave Travel Allowance (LTA): Tax exemption for LTA can be claimed for certain domestic travel. 
  
  
• Leave Encashment Allowance: Encashed unused leave; it is tax-exempt under specific conditions like retirement or termination.
  
  
• Gratuity: Received after at least 5 years of service, exempt up to ₹20 lakh.
  
  
• Commuted Pension: A lump-sum pension payment received at retirement, partially taxable.
  
  
• Other Allowance: Any other allowance not covered above. 
  

Check out how to add your salary on Quicko here.

If you still have any further queries, you can raise a ticket to get in touch with us.