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Income Tax Exemptions for Salaried Employees

Income Tax Exemptions for Salaried Employees

Highlights

  • Reduce your tax liability with the help of exemptions provided for the salaried employees.
  • Check the exemptions rules given for the allowances received by the employee.
  • Know the exemptions rules given for the perquisites received by the employee.

Every individual is liable to pay tax in India on his income whether he is a self-employed individual or a salaried individual. On the other hand, the government has also given the provisions of exemptions and deductions on the taxable income to remove the tax burden. These exemptions are given in the Income Tax Act 1961. Similarly, salaried individuals can also save some tax if they are aware of exemptions and deductions. So, here you can see the income tax exemptions for salaried employees where you can easily reduce your tax burden. You will just have to see the rules and the number of exemptions available on different types of incomes.

Save Tax on Your Salary

There are exemptions for salaries that can help you to save tax on your net income. So, let’s throw some light on the various exemptions and deductions that can be applied while computing the income from salary.

Allowances Exemptions

AllowanceRules
House Rent Allowance ExemptionThe least of the following will be Exempted in the case of HRA.
- Total HRA received from your employer.
- Rent paid - 10% of (Basic salary +DA)
- 40% of salary (Basic Salary + DA) for non-metros and 50% of salary (Basic Salary + DA) for metros
Leave Travel Allowance Exemption- An Individual can claim LTA exemption twice in a block of 4 years.
- LTA covers the cost of only domestic travelling and not international travel.
- The mode of travel must be either through rail, air, or public transport.
Standard Deductions u/s 16The government has given a Standard Deduction of ₹40000 to every individual in the place of transport allowance and medical reimbursement. Later on, the limit of this deduction was increased to ₹50000.
Mobile ReimbursementMobile Reimbursement is Tax-Free but the employee can claim the least of the following as reimbursement:-
- The actual mobile bill paid.
- The amount provided in the salary package.
Books and PeriodicalsAll the expenses incurred on books, newspapers, periodicals, journals, and so on are exempted from tax.
Food Coupons- Food Coupons are exempted up to ₹50 per meal.
- You will get an exemption of up to 2 meals in a day.
Children Education Allowance Exemption- Individual can claim an exemption of up to ₹100 per month on this allowance.
- This exemption is available for up to 2 children in a family.
Reallocation AllowanceIf the following costs are paid by the employer on behalf of the employee within 15 days when the employee is being relocated:-
- Cost of Car Transportation – Exempted.
- Car Registration Charges- Exempted
- Packaging Charged – Exempted
- Accommodation Charges- Exempted
- Cost of Train and Air Tickets- Exempted
- Brokerage Cost for a Rented House- Taxable
- School Admission Fees- Taxable
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Exemptions Rules for Perquisites

There are certain perquisites given by the employer to the employee for his convenience. In other words, perquisites are the facilities that give comfort and enhance the way of living of an employee. So, if you enjoying the free of cost facilities then you will have to pay taxes on it. But some perquisites are exempted from taxes. So, let’s see the income tax exemptions for salaried employees when they receive perquisites.

PerquisitesExemption Rules
Cab Facility by the EmployerIt is an expense of the employer so it is not a taxable perquisite for the employee.
Health Club Facility Given by the EmployerThis facility is fully exempted from tax and the employee does not have to pay any taxes on this perquisites.
Gift or Vouchers are given by the Employer- Gift or vouchers given by the employer whether in cash or in-kind is taxable in the hands of the employee.
- ₹5000 is the maximum tax exemption for this perquisite and the rest of the amount is taxable.
Medical Expenses Paid by the Employer for the Treatment outside IndiaIf the employer pays the following expenses for the medical treatment outside India:-
- On the Employee
- Any member of the family of such employee
- Travel and stay abroad of the employee or any member of the family who is having the medical treatment.
- Travel and stay abroad of one attendant who accompanies the patient who is having the medical treatment.
Then all of them will be exempted in the following conditions:-
- Only to the extent the Reserve Bank of India has permitted.
The expenditure on travel shall be excluded from perquisite only in the case:-
- If the gross total income of an employee, as computed before including therein the said expenditure, does not exceed ₹2 Lac rupees.
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