If you are a salaried person, you have a right to claim the benefits of an exemptions available on your few parts of the salary components given either in the form of ‘Allowances or Perquisites’. Here is the list given of most of the common exemptions which can be availed by a salaried person on his / her ‘Allowances or Perquisites’:

S.No. Particulars Benefits
1. House Rent Allowance Least of the following is exempt:

a) Actual HRA Received

b) 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Madras)

c) Rent paid minus 10% of salary

* Salary= Basic + DA (if part of retirement benefit) + Turnover based Commission

Note:

i.  Fully Taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent.

ii. It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than Rs. 1,00,000.

2. Children Education Allowance Up to Rs. 100 per month per child up to a maximum of 2 children is exempt
3. Conveyance Allowance Exempt to the extent of expenditure incurred (On submitting proofs / receipts)
4. Uniform Allowance Exempt to the extent of expenditure incurred (On submitting proofs / receipts)
5. Helper/Assistant Allowance Exempt to the extent of expenditure incurred (On submitting proofs / receipts)
6. Any Allowance granted to meet the cost of travel on tour or on transfer Exempt to the extent of expenditure incurred (On submitting proofs / receipts)
7. Books or periodicals Exempt to the extent of expenditure incurred (On submitting proofs / receipts)
8. Services of a domestic servant including sweeper, gardener, watchmen or personal attendant Amount payable by employer less any amount recovered from the employee shall be taxed under perquisite
9. ESOP ESOS is an option which is given to the employees to purchase company’s shares at pre-determined price at a future date. Its taxability is calculated at two stages-

a)     First it occurs when shares are allotted to the employee after he has exercised his option on completion of the vesting period.

b)     Secondly when the employee opts to sell the allotted shares.

Taxability under option (a)- It will be taxed as a perquisite and the difference of FMV (Fair market value) on the date of exercise of an option and the Exercise price will be counted as a perquisite u/s 17(2)(vi) of an Income Tax Act, 1961 and will reflect in your Form 16 under an annexure Form 12BA.

Taxability under option (b)- When an employee decides to 0sell the shares, its taxability will fall under capital gains which is the difference of sale proceeds and FMV of shares at the time of exercise of an option.

10. Food coupons Free meals in excess of Rs. 50 per meal less amount paid by the employee shall be a taxable perquisite
11. Any other benefit or amenity extended by employer to employee Taxable value of perquisite shall be computed on the basis of cost to the employer less amount recovered from the employee.

However, expenses on telephones including a mobile phone incurred by the employer on behalf of employee shall not be treated as taxable perquisite.

12. Tax paid by the employer on perquisites (not provided for by way of monetary payments) given to employee Fully exempt
13. Leave Travel Concession or Assistance The exemption shall be limited to fare for going anywhere in India along with family twice in a block of four calendar years
14. Motor Car / Other conveyance
(Motor Car is owned or hired by the employer & running / maintenance expenses are reimbursed by the employer)
Motor car is used partly in the performance of duties and partly for personal purposes –

-Engine capacity upto 1600 cc = Rs. 1800/- p.m (plus Rs. 900 per month, if chauffeur is also provided to run the motor car)

-Engine capacity above 1600 cc = Rs. 2400/- p.m (plus Rs. 900 per month, if chauffeur is also provided to run the motor car)

Note:- Nothing is deductible in respect of any amount recovered from the employee.

15. Motor Car / Other conveyance
(Motor Car is owned by the employee & running / maintenance expenses are reimbursed by the employer)
Motor car is used partly in the performance of duties and partly for personal purposes –

-Engine capacity upto 1600 cc = Actual expenditure incurred by employer less Rs. 1800/- p.m (plus Rs. 900 per month, if chauffeur is also provided to run the motor car)

-Engine capacity above 1600 cc = Rs. 2400/- p.m (plus Rs. 900 per month, if chauffeur is also provided to run the motor car)

Note:- Amount shall be further deducted in respect of any amount recovered from the employee.

16. Motor car owned by employee and used exclusively for personal purpose Actual expenditure incurred by the employer minus amount recovered from the employee shall be taxed under perquisite.

Apart from the above- mentioned exemptions, taxpayer can be able to reduce their tax liability by opting for various investments schemes which qualifies for deduction from their taxable income. Here is the list given for most common tax savings plans which can work in the form of income savings along with a tax savings-

Sections Maximum Deduction/year Remarks
Section 80C 1,50,000 LIC, Fixed term deposits, EPF, Home loan principal etc.
Section 80CCC Contribution to certain pension funds
Section 80CCD (1) Contribution to pension scheme of central government
Section 80CCD(1B) 50,000 Investment in NPS (Tier 1)
Section 80CCD (2) Max 10% of his salary (Basic+DA) Employer’s contribution in pension scheme of central government
Section 80D 25,000 Mediclaim – Self
25,000 Mediclaim – Parents
50,000 Mediclaim – Parents aged >= 60 yrs
Section 80DDB 40,000 Medical treatment only for specified diseases
Section 80GG Lower of Rs. 60,000 or 25% of Adjusted total income Deductions in respect of rent paid by non-salaried individuals who don’t get HRA benefits
Section 80G No limit 1.Only qualifying donations (paid through banking mode)
2. Cash donations upto Rs. 2,000/-

Author Bio

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Location: Gurgaon, Haryana, IN
Member Since: 09 Sep 2020 | Total Posts: 5
Practising Chartered Accountant having experience of more than 8 years in handling taxation, Income tax filings, ROC work, GST, Stautory & Tax audits, Foreign payment compliances etc. Industry exposure includes logistics sector with transportation, GTA, trading, start ups, manufacturing etc. View Full Profile

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