Key idea
Not every rupee your employer pays is taxed the same way. Some parts, paid against actual bills, can reach you tax-free.
Salary components fall into two families for tax. Allowances are usually fixed and mostly taxable. Reimbursements are paid against actual bills you submit, and several of these can be tax-friendly, because they repay a real expense rather than adding to income.
A rough map
Usually taxable
- Special allowance
- Most fixed allowances
- Bonus and variable pay
Can be tax-friendly
- Reimbursements against bills
- Certain specified components
- Employer NPS and PF
The big caveat
The new regime removed most of these small exemptions, so many components that were tax-friendly under the old regime are simply taxable now. Whether a "tax-free" component actually helps you depends on which regime you are in.
The honest summary: reimbursements against genuine bills can reduce tax, but the list has shrunk, and it mostly matters under the old regime. Do not restructure your salary around a benefit your regime no longer offers. Figures for FY 2026-27. The Budget can change them each year, so confirm the current year.
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