Components and Computation of Salary

HRA
House rent allowance received by an employee is exempt as per the calculation prescribed under Income Tax Rule 2A which fixes exemption to the least of following
if the house is in Mumbai, Kolkata, Delhi or Chennai- 50% of salary and to any other place 40% of salary due for the relevant period actual allowance received for the relevant period

Salary for the purpose of computation is Please note that HRA exemption is not available when an assessee lives in his own house or in a house for which he does not pay rent. So rent payment evidence is very important for claiming HRA exemption.

Dearness Allowance
DA (Dearness Allowance), CCA( city compensatory allowance)
It is the amount payable to meet the cost of living in that particular city. For e.g. people staying in metros or Tier I/II city are paid some amount as D.A/CCA per month because cost of living is high or in other words consumables are dearer in that particular city Variable DA is variable according to changes in the consumer price index. The base index will depend upon the industry and the settlement arrived at by the respective state's minimum wages committee. VDA will be calculated at the rate of every increase in the consumer price index over the base so fixed. Therefore, a reference to the CPI is required to pay VDA on a monthly basis. Normally, VDA is a component of minimum wage fixation. VDA of all the employees in a particular industry (say, plywood sector, coir sector, leather sector) will be one and the same irrespective of basis salary. Fixed DA on the other hand, is a fixed percentage of the basic salary. Therefore, higher the basic salary the higher will be the FDA. FDA need not necessarily be fixed for a long time. It will also be revised according to changes in the CPI but not frequently. The amount of FDA will not be uniform for all the employees but will depend upon the basic salary.

TDS
TDS' or best known Tax Deducted at Source is one of the modes of collecting Income-tax from the assesses in India. This is governed under Indian Income Tax Act, 1961, by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service (IRS), Ministry of Finance, Govt. of India. In simple terms, TDS is the amount of tax getting deducted from the person (Employee) by the person paying (Employer). National Securities Depository Ltd. (NSDL) after having modernised the settlement system in the Indian Capital Market by pioneering scripless settlement is now in the process of establishing a nationwide Tax Information Network (TIN) on behalf of the Income Tax Department (ITD). This is designed to make the tax administration more effective, furnishing of returns convenient, reduce compliance cost and bring greater transparency. NSDL will be the primary agency responsible for the design, implementation and maintenance of TIN as per the requirements of ITD.

Tax Deduction Account Number

Tax Deduction Account Number or TAN is a unique identification number for person deducting the tax. The person who is liable to deduct the Tax should obtain a TAN before deducting such Tax. TAN should applied through Form No 49B (prescribed under Income Tax Law). Such form can be submitted online at website. OR can also be submitted at Tax Information Network Facilitation Center (TIN-FC). These centers are established by NSDL (which is an appointed intermediary by the Government) across India. TAN Application should accompany a 'proof of identity' and a 'proof of address' (photocopies) of the deductor. In case, the application is made online, these documents need to be sent over mail (post/courier) to NSDL - TAN Application division. Once NSDL receives the TAN application, the details are verified and then sent to Income Tax Department. Once approved, Income Tax Department will allocate a unique number, and indicate the applicant through NSDL. TAN will be a 10-character alphanumeric string composed of four alphabetic, five numeric, then one alphabetic character. E.g.: "BLRR02933A". The first three characters are an Income Tax Region Code (BLR => Bangalore) and the fourth digit is the first character of the deductor name (R => is denote to the deductor). Remaining characters form a unique combination to get identified at Income Tax Department.

LTA
Leave Travel Allowance (LTA) is basically defined as the cost of travel granted to employees to travel anywhere in India, while on leave from work. The amount of exemption depends upon the mode of travel, and it is allowed only towards the travel fare, and not for boarding and lodging. It is allowed twice in a block of four calendar years. If in a particular block one is not able to claim LTA exemption for one or both journeys, then one journey can be carried forward and can be claimed in the first calendar year of the succeeding block. And thereafter, claim the remaining two journeys of that particular block of four years can also be claimed.