Taxable & Tax exempted allowances in Salary

Hi friends, Many people get Taxable, Tax exempted allowances in Salary. There are many allowances like HRA, Education allowance, LTC, PF, Life insurance, Travelling allowance.

Employees get many Taxable & Tax exempted allowances and services along with basic Salary. Some allowances and services are fully Taxable and Tax exempted. Everyone needs to follow some rules to get Tax exempted allowance. Every salary consist of Basic salary, Travelling allowance (TA), Dearness allowance(DA), HRA (House rent allowance), Overtime duty allowance, Conveyance allowance, Leave travel allowance (LTA), Medical allowance, Performance allowance. Now let’s see allowances in details.

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Taxable & Tax exempted allowances in Salary

House rent allowance (HRA)

Whether the employee lives in a rented house or pays the rent to relatives. Whichever amount is less. Amount will be considered as a tax-free allowance.
1) House rent allowance as per rules of company
2) 10% of basic salary
3) 40% of Total salary received by you [0% of Total salary received by you in case of metro cities. Example- Mumbai, Delhi, Chennai, Bangalore, Hyderabad, Delhi ]

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Education allowance

Generally, Education allowance is given to Employees having Up to two children. Employees can get Rs.100 per month per child tax free. For hostel children Rs.300 per month allowance is tax free.

Leave travel allowance (LTA)

Employees can claim Leave travel allowance for traveling In anywhere India with a family upto two children is tax-free.
Any employee can avail Leave travel allowance (LTA) once in every 2 years. Employees can avail this allowance twice in the four years from 2018 to 2021.This Leave travel allowance (LTA) does not include other expenses incurred other than travel fare.
The new law in pandemic to allow 12 per cent GST on goods and services to be tax-free up to a maximum of Rs 36,000 by March 2021 without direct travel because of the pandemic. Employees can avail the benefits of this scheme by showing receipts.

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Fully Taxable allowances in Salary

Premium of the life insurance policy
Allowance for home repair, furniture, utilities
Car with or without driver
Interest free loan above amount of 20000 rupees
Shares of a company at subsidised rate
Medical allowance even after submitting receipts
Electricity bill, water bill of the house
Salary of the household workers
Gas bill
Contribution of more than Rs. 1.5 lakhs to the Employees SuperAnnuation Fund
Credit card expenses incurred for other than work purposes.

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Fully Tax exempted allowances in Salary

Medical insurance premium to be paid by the owner
Full medical expenses in a government or government accredited hospital for staff and family members of staff.
Workplace amenities such as tea, coffee, meals, breakfast, Free Lunch and dinner
Mobile phones, computers, laptops or other devices given to employees for office use
Facility at residence of employee
Interest free loan Upto 20000 rupees
Health care and equipment of sports
Gift coupon up to five thousand rupees per annum
Contributions for provident fund as well as gratuity contributions or up to Rs. 7.5 lakhs from the employer in NPS

As per Rule 3 of Income tax ,Employees working in private companies can negotiate conveniently with their Employees for tax free allowances in their salary.

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Author of this article is “Pranav Divekar”.

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