Income Tax Exemption for Salaried Employee 2019-20

By | 12/15/2018

It is a nice feeling to get paid at the end of every month for all the effort you put in your work and every salaried employee is very much excited for the annual increment from their employer.

On the other hand, you are getting closer to the grip of the income tax department.

It is very important that you are aware of the salary break up you take home, for your tax assessment purpose, and avail tax exemption for employees.

First, we have to aware of the take-home salary which includes –

Gross salary every month – HRA, LTA, Medical, Conveyance allowance etc – Tax deduction source (TDS) = Net Salary

Exemption for Employee

Understand Take Home Salary

For the purpose of taking tax benefit, you have to understand the meaning of every term individually.

Every salaried Individual need to know about the slab he falls.

Every amount received by the employee in the different head, have their different benefits while paying Tax.

House Rent Allowance (HRA)

House Rent Allowance is the allowance paid by the employer to the employee for accommodation expenses, HRA is accounted under section 10 (13A) of Income Tax Act.

Salaried can take benefit of HRA as an exemption of Income-tax under section 80 GG, (if you are not getting HRA separately in your pay).

Benefits of HRA should be avail on some factors like the amount of rent paid and the city of residence whether metro or not.

The employee is eligible for 40% to 50% of the basic salary depending on the city.

Rent paid receipt to need to be shown to the income tax department to avail the benefit of HRA,

Leave Travel Allowance (LTA)

LTA is one of the best Tax saving tools you can avail. It is the allowance paid by the employer to the employee against travel with your family or alone.

LTA is 100% Tax exempted and restricted only to the travel cost incurred by the employee. The Proper traveling documents need to be shown during Tax assessment.

The exemption is allowed for 2 travel within 4 years.

It is not mandatory to keep documents for travel but it should be asked any time by the Tax department or the employer, so it is advised to keep the documents intact.

Only Domestic Travel is except able in LTA exemption.

Conveyance Allowance (CA)

Conveyance allowances paid by the employer to the employee to compensate the transport expenses of the employee from their home to the workplace, this allowance is paid if the employer unable to provide the transport to the employee.

Exemption on Encashment of Leave

Most of the Employer provide some days as leave for the employee and if the employee does not avail the benefit of the days, then the employee encash the benefit of leave.

The amount received from the employer against encashment of leave will be exempted to a certain level.

After taking benefits of above all that you must take the benefit under section 80 C, you can refer to Understand Tax saving options: 80C, 80CCC, 80CCD, 80D, 80U, 80E, 24

Income Tax Departement also providing a Tax rebate for salaried Employee in Income Details, Part D “Computation of Tax Payable” u/s 87 A, up to Rs 5000/-, you also take the benefit of the scheme. 

Income tax exemption sections

The employee should aware of the benefits of all these allowances and after providing the clear-cut documents of the above deduction the amount should be reimbursed from the employer.

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Amit Bansal
Amit Bansal
Hey, Amit Kumar Bansal, the man behind this blog. I always passionate about Taxes, Stock Market. This was one of the reasons why I have chosen the field of account. Blogging was not the coincidence it was a proper decision. The main aim of this blog is to help readers to take an informed financial decision. If you like my efforts kindly subscribe to this blog and also let your friends know about this website by sharing.

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