Hi,
When a part of the base salary is chosen as tax saving reimbursement, it does not reduce the taxable base salary by that amount. For example: Given below are the components of the base salary
- Basis
- HRA
- Special Allowance (Balancing figure)
To save on taxes, if employee chooses 30K (out of total base salary of say 200K) per annum as meal reimbursement , special allowance should get reduced by 30K and 200K less 30K should become taxable.
Any thoughts or guidance will be highly appreciated