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Income tax exemption for salaried employees
August 17, 2022Table of Contents
If you are a salaried employee, it is likely that you cringe every time a part of your salary goes into tax payment. While this may not be a happy thought, there are certain tax exemptions on your salary that you can claim.
House Rent Allowance
If you are staying at a rented house, you can claim a tax exemption in lieu of Section 10 (13A) of the Income Tax Act. Many employers give House Rent Allowance (HRA) to their employees for them to reside in at a good place. However, there are certain conditions & ndash- An employee must pay rent for the house which he occupies.
- The rented house must not be owned by him and.
- He must submit proof of rent being paid through rent receipt.
- Actual House Rent Allowance received from your employer.
- Actual house rent paid by you, minus the 10% of your basic salary.
- 50% of your basic salary if you live in the metro and 40% of basic your salary If you live in any other place.
Leave Travel Allowance
Many companies also give allowances to their employees to go on a holiday with their respective families. Government employees can avail of the benefit of a leave travel concession (LTC), which can be used for traveling anywhere in India.- Leave to any place within India.
- Any place in India after retirement from service or after the termination of the service.
- No LTA is cashed without performing the journey.
- Employee can claim the exemption in respect of any 2 journeys in a block of 4 years.
- Family for this purpose means spouse and 2 children. It also includes the parents, brothers, and sisters of the employee or are wholly or mainly dependent upon him.
- LTA is only available in respect of fare.
Encashment of Leaves
Most employees give all their employees a certain number of leaves which can be claimed as leaves. In case the employee does not wish to claim these leaves, they have the option of encashing these leaves. This amount received as leave encashment is allowed an exemption up to a certain limit.Pension Income
Pensions are paid on the retirement of the Employee. Pension is of two types. Commuted pension, in which the whole amount of pension is received in a lump sum, and Uncommuted pension, the amount Is paid in installments at regular intervals of time.Gratuity
Gratuity is a gift by the employer to his employee for the past services rendered by him. For the purpose of tax exemption on gratuity under Section 10 (10), employees are divided into three categories & ndash- For every completed year of service, gratuity shall be paid at the rate of fifteen days' wages based on the rate of wages last drawn by the concerned employee.
- The amount of gratuity as calculated above shall not exceed Rs. 10,00,000/-
- It will be limited to half a month's salary for each completed year of service or Rs. 10 Lakhs whichever is less.
- Where the gratuity was received in any one or earlier previous years also, then the exemption to be allowed during the year gets reduced to the extent of exemption already allowed, the overall limit being Rs. 10 Lakhs.
Voluntary retirement from the service
Many employees opt for Voluntary retirement from the services i.e. retiring before the actual age of retirement (60 years). In such cases, employers give some money to the employee on his voluntary retirement. Section 10 (10) allows exemption to the extent of Rupees 5 lakhs.Perquisites
Many employees are entitled to perquisites or perks. Such as cars, rent-free accommodation, medical facilities, etc. there are tax exemptions on such facilities up to a certain limit. Such as:Various other exemptions
There are other allowances such as transport allowance, Children Education Allowance, Helper allowance, etc., allowed to salaried employees but up to a certain limit.
Greater Kailash - 1, Delhi
5 years
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