Income Tax Exemptions For Salaried Employees U/s 10

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.

In this article, you will understand that the salary you received is not 100% taxable.

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

Gross salary every month – Basic Salary, 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 tax slab you falls.

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

Allowance Exempt U/s 10

According to various subsections of section 10 of the income tax act, some of the allowances are fully or partially exempted from income tax.

In short, You don’t have to pay the tax on the 100% salary you received in your account. (I have seen almost every friend of mine) paying income tax on 100 % salary.

Let’s begin with:

House Rent Allowance (HRA) u/s 10(13A) & Rule 2A

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.

If you are living in your own house, the HRA amount is 100 % taxable.

Leave Travel Allowance (LTA) u/s 10(5)

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 u/s 10(5) and restricted only to the travel cost incurred by the employee. The Proper traveling documents need to be shown during the 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) U/s 10(14)

Conveyance allowances are the common allowance paid to the employee by the employer to compensate the transport expenses of the employee during working hours.

The vehicle/conveyance used by the employee for official purpose is compensated by the employer in the form of Conveyance Allowance.

This allowance is 100 % tax exempted falls under section 10(14)

Transportation Allowance (TA) u/s 10(14)

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

The Maximum  limit is Up to ₹ 1,600 per month. 

Other than the above exemptions:

Standard Deduction comes into play.

SD allows you to deduct ₹ 40,000 (which is amended from FY 2019-20) ₹ 50,000, from your gross income.

How to use this tax exemption while filling ITR

Income tax department allows you to enter the salary income amount after deduction all the tax exemption, but on the other hand, you have mentioned all the exemption amount in ITR 1 Form under Tax paid and verification section.

ITR 1 Tax paid and verification

…..under Exempted Income [for reporting purpose].

nature of income under section 10

This portion allows you to disclose all your facts to the income tax department and also you can get tax exemptions underneath.

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 12500/-, 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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