No Direct Tax Benefits

• Salary accounts themselves do not provide direct tax deductions or exemptions.
• Merely holding or using a salary account does not reduce taxable income.
• Interest earned on the balance is taxable under ‘Income from Other Sources’.
• The account functions primarily as a salary credit and transactional tool.
• Tax planning must be done through eligible instruments, not the account alone.

Salary Components Affect Taxability

• While the account offers no tax benefit, salary credited into it may include exempt components.
• These may include House Rent Allowance (HRA), Leave Travel Allowance (LTA), and conveyance allowance.
• Tax benefits arise from these components, not the account itself.
• The individual must claim exemptions through income tax returns.
• The structure of the salary influences total tax liability.

Linked Investment Tools

• Salary accounts often offer easy access to tax-saving investments like ELSS, PPF, or FD (under 80C).
• Contributions made via the salary account to these instruments may qualify for deductions.
• Automated investments or payroll deductions can streamline tax planning.
• Tax benefit depends on actual investment, not account usage.
• Statements from the account help in tracking such contributions.

Form 16 and TDS Tracking

• Salary accounts help in monitoring TDS deductions made by the employer.
• TDS on salary is reflected in Form 16, and linked account transactions support verification.
• Proper use of the salary account simplifies annual tax filing.
• Salary slips and credits help reconcile Form 26AS and ITR forms.
• The account acts as a record-keeping tool, not a tax-saving one.

Indirect Benefits for Financial Planning

• Some banks offer tax advisory services with salary account packages.
• Digital banking tools help analyze expenses and optimize deductions.
• Salary accounts may be bundled with pre-approved tax-saving loans.
• Certain expense reimbursements (like fuel or mobile bills) routed through the account may reduce taxable income if declared by the employer.
• The account’s role is supportive, not a standalone tax-saving medium.