Income Tax Exemptions for Salaried Individuals

House Rent Allowance

• HRA is a salary component your employer provides to support your housing expenses if you live in rented accommodation. You can claim this amount as an exemption under Section 10 (13A).

• The exemption is available only if you receive HRA as part of your salary package. To compute the exemption amount, consider the least of the following:

• The actual HRA received from your employer.

• 50% of your basic salary, including dearness allowance (DA), if you reside in metro cities (Delhi, Kolkata, Mumbai, or Chennai) or 40% for non-metro cities

• The actual rent paid minus 10% of your basic salary plus DA

Note:

• You may need to furnish your employer with the receipts and proof of rent payment.

• This exemption is available only if you file an ITR under the old tax regime.

• While HRA is not applicable to self-employed individuals, a similar tax deduction for rent paid is available under Section 80GG.

Leave Travel Allowance (LTA)

• This provision allows you to claim a deduction on travel expenses incurred during their leave. Here are the criteria for claiming LTA benefits.

• You must be a salaried employee with LTA as part of their Cost to Company (CTC).

• The exemption covers travel expenses for the employee and their family, which includes the children, spouse, and mainly dependent parents, brothers, and sisters.

• However, it is essential to note that the exemption is only available for up to two children of the employee born after October 1, 1998, unless there are multiple births after the first child.

• The exemption applies to travel within India. It is available for two trips in a block of four years. The current block year is 2022-2025.

• For exemption, actual travel must occur, and the journey should be via the shortest route. The amount exempted will be the lower of the actual travel cost or the economy-class airfare or first-class train fare, as applicable.

• You must submit proof of travel, such as tickets or boarding passes, to their employer. The exemption is then claimed through the employer, who adjusts the tax liability accordingly.

Standard Deduction

• The standard tax deductions for salaried employees, as per the provisions of section 16 (IA), is a fixed sum that you can deduct from your income before income tax is applied as a salaried individual or a pensioner.

• If you are a salaried employee, the deduction limit is ₹50,000. In the case of a pensioner, it is ₹50,000 or the actual pension amount, whichever is lower. The standard deduction applies to both the old and new tax regimes.

• It is important to note that while the standard deduction amount has not changed in the latest budget, other tax-related changes have been introduced, such as adjustments in income tax slabs and surcharge rates. You must stay informed about these changes to understand your tax liabilities better and plan accordingly.

Food Coupons

• Food coupons also known as meal vouchers, are another popular income from salary exemptions. These coupons are tax-exempt, up to ₹50 per meal. To qualify for this exemption, you must use the meal vouchers during working hours, which are typically restricted to two meals per working day.

• The annual allowance for meal coupons is calculated based on the number of working days.

• Employers provide these food coupons in physical or digital form, which can be redeemed at various eating joints. The exemption is granted upon submission of proof to the employer, who will then calculate the tax exemption on the allowance. Any amount over the exempted limit is added to the taxable salary.

Section 10(6)

• This provides tax exemptions on remuneration for Indian citizens working outside India under specific conditions. Here are the details:

• The individual must be an Indian citizen working outside India.

• The remuneration must be received while serving in an official capacity.

• The services should be rendered to the Indian Government.

• Salaries received as an employee of an embassy, high commission, legation, consulate, or trade representation of a foreign state.

• Remuneration received while being employed as a trade commissioner or other official representative of the Government of India

• The exemption is valid only if the remuneration of corresponding officials of the Government of India in the foreign country is also exempt.

• The staff receiving the exemption should be subjects of the country they represent and not engaged in any other business or profession in India.

• The exemption under Section 10(6) does not cover other types of income, such as interest, dividends, or capital gains earned in India.

• It is specifically designed for remuneration received in an official capacity and does not extend to private employment or business income.

These were some of the more popular tax exemptions you can claim when filing your tax returns. Understanding tax exemptions before filing your ITR can help you save taxes. However, we recommend you also focus on tax deductions rather than only paying attention to exemptions, as these could also be of help in reducing your tax laibility.

One of the most popular deductions available for salaried individuals is under Section 80D for health insurance policy premiums. This provision allows you to claim premiums paid towards medical insurance plans. These policies not only provide tax benefits but also many other perks.

For example, if you buy cashless health insurance from Tata AIG, you get covered for hospital bills, OPD, pharmacy, and other key expenses at any hospital of your choice in India. We also provide critical illness insurance that provides a lump sum upon the diagnosis of a chronic disease.