Manesh's appraisal letter came. ₹15L CTC. HR sent the new salary structure: 50% Basic + 50% Special Allowance. He skimmed it, signed, didn't think twice.
His friend, also at ₹15L, takes home ₹40K more after tax — same regime, same company. The difference? Structure.
- Components that save tax (old regime): HRA, LTA, employer NPS, food coupons, reimbursements (phone / books / fuel).
- Most tax-efficient structure: ~40% basic + HRA + 80CCD(2) NPS + reimbursements + variable.
- Only employer-NPS 80CCD(2) and standard deduction also work under new regime.
- Negotiate at offer / appraisal time — mid-year changes are painful.
The optimal ₹15L structure (old regime)
Fully taxable, but drives HRA, PF and NPS calculations. Don't let HR cut this below 40%.
Largest single saver. Exempt up to your actual rent − 10% of basic.
10% of basic. Fully tax-free, over and above 80C. Works in both regimes.
Food coupons (₹26k), phone+internet (₹30k), books / periodicals (₹24k). All tax-free with bills.
Twice in a 4-year block (current 2022-25). Travel cost only, India only, bills mandatory.
The leftover bucket. Fully taxable. Keep it small.
HRA — the biggest single saver
HRA exemption (Section 10(13A)) = least of these three:
👉 Actual HRA received
👉 50% of basic (metro) or 40% (non-metro)
👉 Actual rent paid minus 10% of basic
Manesh's worked example
Basic ₹6L. HRA ₹3L. Rent ₹25K/month (₹3L/year) in Mumbai.
Pay rent to your parents via bank transfer. Get rent receipts. They declare it as their income (usually still tax-free under their exemption). Win-win — but it must be a genuine arrangement (real transfer, not a paper one).
The other tax-savers — what to negotiate in
Food coupons
~₹26k/year
₹50/meal × 2 meals × 22 days × 12. Sodexo / Zaggle. Use them — they expire monthly.
Employer NPS
~₹60k/year @ 10% basic
80CCD(2). Fully tax-free, above 80C cap. Works in both regimes. The most modern saver.
Bill-backed reimb
Phone, internet, books
Phone+internet ₹30k. Books ₹24k. Driver/fuel if company car. Fully tax-free with bills.
LTA — twice in 4 years
Section 10(5) — travel cost for self + family within India. Two trips per 4-year block (current block: 2022-25).
👉 Only covers travel (flight / train / bus). Not lodging or food.
👉 Original tickets / boarding passes required.
👉 Family = spouse, children, dependent siblings, dependent parents.
Company car — the under-valued perk
If your CTC includes a company car for personal + office use:
👉 Perquisite valued at just ₹1,800/month (≤ 1.6L cc) or ₹2,400/month (> 1.6L cc)
👉 + ₹900/month if driver is provided
Real EMI on a ₹15L car is ₹25K+. Tax department values the perk at ₹1.8K/month. Significant under-valuation — for senior roles, this is a major hidden saver.
What NOT to do
👉 Don't drop basic below 40% — it shrinks HRA exemption, PF, and gratuity.
👉 Don't take reimbursements as a flat allowance. "Phone allowance ₹2,500/month" is fully taxable. "Phone reimbursement with bills" is tax-free. Same money — different tax treatment.
👉 Don't ignore the new regime math. If your deductions total < ₹3.75L, new regime usually beats this carefully optimised old-regime structure.
Same CTC, different structure, ₹40,000 difference in take-home. Salary structure is one of the highest-leverage 1-hour conversations in your career.
The full ₹15L worked breakdown
Negotiate this — checklist for next appraisal
- Keep Basic at ~40% of CTC (lower hurts HRA and PF)
- HRA = 40-50% of basic (depending on metro / non-metro)
- Employer NPS 80CCD(2) = 10% of basic
- Food coupons ₹2,200/month
- Phone + internet reimbursement (bill-backed)
- Books + periodicals reimbursement (bill-backed)
- LTA (use it — don't let it lapse)
- Variable / performance pay — keep this small in fixed structure if possible
Quick answers
No. New regime turns off HRA, LTA, food coupons, bill-backed reimbursements. Only standard deduction (₹75k) and 80CCD(2) (employer NPS) survive. Run both calculations before optimising — see our old vs new regime guide.
Most companies allow it only at appraisal or once a year. Some allow a one-time mid-year restructure. Ask HR; the answer varies by employer.
For rent above ₹1L/year, you also need the landlord's PAN. Below that, rent receipts alone are enough. If audited, the IT department can ask for bank-transfer proof too.
You can still get NPS through your bank or directly — but only 80CCD(1B) self-contribution (₹50K) applies, not the larger 80CCD(2). Many employers add NPS on request — worth asking.
Yes — taxed as perquisite at exercise time (FMV − exercise price) under salary head, then again as capital gain at sale. See our ESOPs guide.
When you might want help
The structure itself is mechanical once you know the levers. Where the conversation gets valuable: planning around a promotion / new offer, structuring a senior package with car + ESOP + variable, and modelling both regimes against your structure 2-3 years ahead to pick the right one.
Have an offer letter to review?
30-minute call. We restructure your CTC for maximum take-home — given your actual life (rent, home loan, family).