.gif)
It is advisable to all the salaried individuals to make a note of the below listed Income Tax Exemptions as it might aid to save tax, reduce the tax burden and save money –
1. HRA Exemptions
Several employers and organisations alike provide (HRA) House Rent Allowance to salaried professionals to live in a decent abode of their choice. A part of HRA offered by an organisation to a professional is excused from the charge of Income Tax
2. Exemption of Tax from Pension Income
After retirement, several organisations pay a pension to the salaried professionals.Pension are of two types:
- Commuted pension: Entire sum is given in lump sum.
- Un-commuted Pension: The sum of the pension is given in instalments.
In both cases, the employee can enjoy Income Tax Exemption to a defined extent.
3. Exemption on Leave Travel Allowance
Several organisations provide grants to their salaried professionals to embark on a trip with families. This allowance is excused from the tax to a definite extent - given that the travelling was done within India.This is an essential income tax exception, and the money can be asked for if the professional truly takes a holiday – after successfully providing the vacation details.
4. Tax Exemption on Gratuity
In gratitude of the past services, gratuity is an amount given by an organisation to their employer. Gratuity can be received in two ways:1) The salaried professional himself receives at the time of retirement.2) The lawful heir receives at the time of the demise of the salaried professional.
5. Exclusion on Encashment of Leaves
Almost all the organisations offer a certain amount of days that can be taken as offs/ leaves to their employees. In case an employee doesn’t avail these leaves, several organisations give an option of encashing these leaves. The amount received for encashing these leaves is to an extent exempted for Income Tax purposes. This is one of the most important income tax exemptions for salaried professionals.
6. Income Tax Exemption on VRS Received
Several salaried professionals opt for Voluntary Retirement (VR) before the granted retirement age. In these cases, the organisation pays a small amount of money to their employees.The received sum by the professional on voluntary retirement below the “golden handshake” scheme is excluded under Sec. 10C.
7. Exemption of Various Allowances
Organisations allow several allowances like Children Education Allowance , Transport Allowance, and many more. These allowances are also allowed for exemptions but only to a pre-specified limit.
8. Perquisites Are Not Exempted
Several organisations provide multiple perquisites like Phones, Car, and Rent-Free accommodation.Please note that these are not tax-free.Ready to make the most of your money? Start your tax planning journey now!
FAQS - FREQUENTLY ASKED QUESTIONS
What are the rules regarding exemption of income tax ?
In India, certain rules and provisions allow individuals and companies to claim exemptions on their income tax payments. Some of the common rules regarding exemption of income tax in India include the following:
Extra Deduction of INR 50,000 according to Sections 80C, 80CCC, and CCD (1)
Interest paid on a house loan, according to Section 24, is INR 2,00,000
INR 2000 for income up to INR 500000 under Section 87A of the Income Tax Act
Exemptions for Allowances - These exemptions consider the allowances the employer offers. The following are the most known ones: Transport Allowance, House Rent Allowance (HRA), Leave Travel Allowance or Leave Travel Concession, Hostel Subsidy, and Children's Education Allowance.
It should be noted that only salaried individuals are eligible for these exemptions.
What are the conditions for tax exemption ?
There are several conditions under which an exemption from tax may be granted in India. Some of the more common conditions include:
Being a resident of India for less than 60 days in a financial year
Being a resident of India for less than 182 days in a previous financial year
Not having a permanent place of business or residence in India
Not having any income from sources in India
Other conditions may also apply in certain cases. For example, exemptions from tax may be granted to certain religious organisations, charitable trusts or individuals employed by the government of India.
What is income tax exemption under Section 10 for salaried employees ?
For salaried employees, there are various allowances exempt under Section 10, like travelling allowance, uniform allowance, daily allowance, house rent allowance, helper allowance, etc.
How can we save income tax on our salary ?
If you are looking to save tax on your salary in India, several options are available. Here are some of the well-known methods:
Invest in Tax Saving Instruments:
The government of India allows individuals to claim deductions on investments made in certain tax-saving instruments, such as Public Provident Fund (PPF), National Savings Certificate (NSC), Equity-Linked Savings Scheme (ELSS), and so on. These deductions can be claimed under Section 80C of the Income Tax Act, 1961. You can invest up to Rs. 1.5 lakh in these instruments to claim the maximum deduction.
House Rent Allowance (HRA):
If you receive an HRA as a part of your salary, you can claim a deduction. The deduction amount is calculated based on the actual HRA received and the rent paid by the individual. You can claim the deduction under Section 10(13A) of the Income Tax Act.
Medical Reimbursement:
If your employer offers medical reimbursement as a part of your salary package, you can claim a deduction. Under Section 80D, an individual can claim a deduction on medical expenses up to a certain limit.
Leave Travel Allowance (LTA):
If you receive an LTA as a part of your salary, you can claim a deduction. The deduction amount is calculated based on the actual LTA received and the travel expenses incurred by the individual. You can claim the deduction under Section 10(5) of the Income Tax Act.
Contribution to NPS:
You can claim a deduction if you contribute to the National Pension System (NPS).
What are the fully tax exempted allowances ?
Non-taxable or fully exempted allowances are benefits provided to employees that are included in their compensation and are fully exempted from tax.
What are the 3 conditions for HRA exemption ?
The 3 conditions for HRA exemption are:
You must be self-employed or salaried.
At no point have you received HRA during the year for which you filed an 80GG
You and your spouse do not own any residential properties where you presently reside.
Can I claim HRA and home loan both ?
Yes, if you fulfil the requirements, you are eligible for the HRA tax exemption and the home loan tax deduction claiming the circumstance is genuine.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
.webp)
.svg)
