5. Tax Exemptions explained in detail

Allowances are certain parts of your income where you don’t have to pay tax. After reading this article you will be amazed to know how many ways you can actually save tax. These exemptions which I am going to talk about will help you structure your taxes accordingly.


Standard deduction

The finance minister presented a standard deduction of 40,000 in the union budget 2018. This amount has been increased to 50,000 in the interim budget of 2019. This 50,000 is applicable to all the income irrespective of your income range.


HRA House Rent Allowance

If you are living in rented accommodation and you receive HRA allowances in your salary payslip, then you are eligible to get this HRA amount tax-exempt, either totally or partially. You can either submit the rent receipts to your company or while filing your income tax. You need to keep in mind if you make rent payments above 1 Lakh annually then you would also need to submit your landlord’s PAN details.

You can claim the least of the following as HRA:

  1. Total HRA received from your employer.

  2. Rent paid less than 10% of (Basic salary + DA)

  3. 40% of salary (Basic salary + DA) for non-metros and 50% of salary (Basic salary + DA) for metros.


Leave travel allowance

If you are traveling domestically, via air, railway, or public transport during your leave, you can avail of these expenses under LTA. The cost of shopping, food expenses, entertainment, and other leisure is not included in this. You can claim LTA twice in a span of 4 years and your LTA amount will be specified by your employer. You can claim LTA benefit for the travel costs of yourself, your siblings, your spouse, children, and dependent parents.


Food Coupons

Your employer might provide you with meal coupons such as Sodexo or a food card. The meal coupons are calculated as 50 rupees per meal, 2 meals per day, 22 working days per month, 12 months a year amounting to 26,400 yearly costs. This amount is completely tax-free of your avail for food coupons.


Children allowance

Sometimes, the employer may allow education allowances for your children as part of your salary. You can claim a maximum of 1200 per child per annum as an exemption for a maximum of 2 children. Along with this, you can claim fees paid for your children under deductions. To know more about deductions in detail, you can check out the video in the I button here.


Relocation allowance

When you relocate to a different location, your employer might make a direct payment for such expenses. These expenses are completely exempt from tax. Let's look at some of these:


Car transportation:

There might be expenses to transport your car to a new location through packers and movers. You might get reimbursement for these expenses from your employer, which is tax-free.

Car registration:

Certain states have mandatory laws to register your car to the state RTO. This expense is reimbursed by the employer and is exempt from tax upon certain conditions.

Packaging charge:

The expenditure on the packaging and moving of the furniture, irrespective of reimbursement or direct payment by the employer, is exempt from tax for the employee.

Accommodation:

The employer may provide accommodation facilities for the initial 15 days once you relocate. The expenses reimbursed or met by the employer will be exempt from tax for the employee.

Travel expense:

The traveling expenses for the employee and his family from the current place of residence to the place of new employment are exempt from tax.

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