Salary structure - Can i keep conveyance allowance as 1600 per month and medical allowance as 1250 per month?

Hi everyone, I am preparing the salary structure for one of the companies (year 2019). As the standard deduction is now Rs 50,000, can I keep the conveyance allowance as Rs 1600 per month and the medical allowance as Rs 1250 per month? Should I exclude the conveyance allowance and medical allowance from the salary structure, or should I include some other salary component instead? Please suggest.

Dear Rajeshwari,

With effect from FY 2018, conveyance allowance and medical allowance have been removed from exemption from Income Tax. It is advisable not to include them in the structure. Instead, I suggest you can add Meal Cards like Edenred, etc., if the company is not providing free or subsidized meals, fuel reimbursement, communication reimbursement, and LTA to make the compensation structure tax-friendly.

Regards,
Rahul Chhabra

Dear Rajeshwari,

The revised rate of Standard Deduction (Rs. 50k) will be applicable for the FY 2019-2020. Up to Mar '19, the SD is Rs. 40K only. Yes, the Medical and Conveyance allowances are not part of IT exemption, hence there is no use. As suggested by Mr. Rahul, you can frame a reimbursement policy against Fuel, Mobile, Books and Periodicals, LTA, etc. But make sure there must be a properly framed policy, and those components should be paid separately. If they are also paid with a fixed amount on a monthly basis without any supporting document, then it can be treated as wages. Hope the points are clear now. Senior, please give more inputs.