How to create a tax exempted salary component?

Tax-exempted salary components are important for employees' salary structures because they help reduce the amount of income subject to tax. By including tax-exempted components such as allowances, reimbursements, or certain benefits in the salary structure, employees can lower their taxable income. This means they pay less tax, leading to more take-home pay and potentially higher net earnings. It's a way for employees to optimize their salary package and maximize their disposable income.

To create such a tax exempted component, go to the Payroll (1) section of the Keka portal, click on Settings (2), and then go to the Components (3) tab.

In the Components tab, select Recurring Components or Ad hoc Components, whichever type of component you want to be tax exempted. Here, let's take the example of a recurring component. 

Go to the Recurring Components (1) tab and click on +Add New Component (2).

In the overlay window, fill in the Component Name, Maximum limit per annum, and select the option "This component is Tax-exempted (non-taxable)" (1). Select the Income tax section under which this component will fall for tax exemption and also provide the corresponding Section maximum limit. Click on Add Component (2) once all the details are filled in.

Now this salary component can be used in any salary structure and assigned to the employees. 

To avail the tax benefits of this type of component, an employee must be under the old tax regime.

We hope you found this article helpful. If you have any other doubts, feel free to check out the other articles on this portal.