Monthly Archives: February 2009

Salary Freeze

I was wondering why the employer has to hike his employee’s salary on a regular basis. Why can’t he just be paid the same amount all his life? Will that be such a big issue? Why does an employee need a salary hike year after year? If the employee is not paid any hike this year what would happen to him? I guess it is the economy that plays a dominant role in the salary hikes rather than the performance of an employee.

Salary hikes are given to the employees so that he has got enough spending power and he goes on spending money and thereby boosting the economy. A economy is said to be good only when people spend lavishly and the prices of the goods are in common man’s reach. It shows the sign of prosperity. Most of the companies today are laying off their employees as a measure of cost cutting. Continue reading

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Should I pay Taxes?

I am writing articles regarding taxes. I don’t preach others that it is bad to pay taxes or advice them not to pay taxes. I believe that Taxes have to be paid by the citizens for the welfare of the nation.

The only thing I want to emphasize is that, why does government gives tax break? It should serve some purpose right? I am certain that most of the rules does make sense even today which was formed way back before my birth. 🙂 Continue reading

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Insurance Policy

This time of the year, most of my friends prefer to go and get Insurance policy just because they have to buy one so that they can save tax. I get calls from various Insurance agents to take up policies from January to March time frame and the prominent reason they give me to buy the policy is “Tax Benefit”. I am not very keen on taking a policy just because I get a tax break. I know that it does not work that way.

I don’t mind taking a insurance cover for the purpose of insurance rather than “Tax Benefit”. But the fact is that most of us prefer to take the policy thinking it will reduce our tax bracket. I have done that in the past. I have taken a policy and I do pay a yearly premium. I did not know much about tax at that time and for tax benefit I did take a policy only to learn that it does not make sense. Continue reading

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House Rent Allowances

The maximum amount of House Rent Allowances (H.R.A.) permitted to be enjoyed by an employee tax-free is up to 50% of the salary in the metros namely Delhi, Kolkata, Mumbai and Chennai and 40% in other cities.

If you notice carefully, there is a clause of “up to” and not flat. This was quite interesting to me when I figured that out. Why not keep it flat? The following is the reason. The government wants some amount of money to be paid by the employee from his pocket which does comes back to exchequer. According to 2A section of the Income Tax Act, the employee has to bear a minimum of 10% of the salary as Rent so that he can get the full benefit of 50% or 40% depending on where he is located. Continue reading

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