tax exemptions

7/29/2019 tax exemptions

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No. Salary Structure

1 Basic Salary

2 DA

4 Computer Allowance

5 Conveyance (Transport)

Allowance

6 Foreign Allowance

7 Helper Allowance

8 Children Education Allownce

9 Children Hostel

Allowance(Amount granted tomeet hostel expenditure on

employee's children)

10 Electricity Expense Allowance

11 Conveyance Allowance

(Reimbursement-Fixed Amount

over & above the amount referred

at S.No. 5)

12 Outstation Allowance

13 Entertainment Expense Allowance

14 Clothing/Uniform Allowance

15 Bonus/Ex Gratia

3 HRA

16 Reimbursement of car expenses

in case of cars owned by the

employer


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17

Reimbursement of fuel bills in

case of car owned by theemployee.


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18 Reimbursement of scooter

expenses in case of scooter

owned by the employer.

19 Reimbursement of scooter

expenses in case of scooter

owned by the employee.

20 Leave Travel Allowance

21 Leave Encashment


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23 Provident Fund

22 Canteen Expense on monthly

fixed basis.

24 Gratuity


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25 Telephone Expenses/(Actuals)

27 Medical Reimbursement

Rent free Furnished

Accommodation:

Where accommodation is owned

by employer.

Where accommodation is taken

on lease or rent by the employer.

26 Medical Facilities

28


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Where accommodation is

provided by the employer in the

hotel (except where aggregate

period of stay does not exceed 15

days on his transfer from one

place to another).

31 Personal / Group Accident

Insurance Policy

29 Sweeper, gardener, watchman,

personal attendant

30 Interest free advances/ loans to

employee or anymember of his

household by the employer or

anyperson on his behalf.

32 Gift or voucher or token


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Movable Asset :

33 Gas, Electric Energy and

Water

34 Free or concessional fare.

35

Travelling, Touring,

accommodation and other

expenses

36


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Where any movable asset (other

than motor cars or laptops or

computers) belonging to employer

or hired by himfor the use of

employees or any member of

hishousehold.

Where any movable asset

belonging to employer are

transferred to employee directly or

indirectlyor any member of his

household.

In case of computers and

electronic items.

In case of motor cars.

37 Free education facility to

employee.

38

Free or concessional educational

facilties for any member of

employee's household.

39

Credit Card


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41 Stock Options

42 Any other benefit

Tax on Remuneration paid to

Technician (not

resident in any of four financial

years preceding

the year when he arrived in India)

Passage money or free or

concessional passage

45

40

Expenditure in Club

43 Tax on Perquisites Borne by

Employer

44


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on home leave or proceeding to

home country

after retirement to foreign

employees, not being

citizens of India.


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Exempt

Max exemption is restricted to least of the following three amounts:

1. 50% of salary (40% in case of cities other than metros

2. Excess of rent paid over 10% of salary

3. Actual amount of HRA received.

Exempt under S.10(14)/ Rule 2BB upto Rs. 800/- p.m. Exempt if

allowance is granted to meet his expenditure forthe purpose of

commuting between the place of hisresidence and the place of duty.

Exempt to the extent incurred on helper where such helper is engaged

for performance of official duties.

Exempt upto Rs. 100 p.m. per child for a maximum of 2 children.

Exempt upto Rs. 300 p.m. per child for a maximum of 2 children.

Exempt to the extent conveyance allowance is utilised for meeting

expenditure on conveyance for performing official duties.

Exempt where allowance is given to meet the expenditure on the

purchase or maintenance of uniform for wear during the performanceof official duties.

Expenses are met or reimbursed by the employer,

If car is used so far for official purposes,

No amount is taxable provided documents as specified in

Note A are maintained by the employer.

Note A: The following conditions should be fulfilled:

1. the employer has maintained complete details of journey

undertaken for official purpose which may include date of journey,

destination, mileage and the amount of expenditureincurred thereon;

2. the employer gives a certificate to the effect that the expenditure

was incurred wholly and exclusively for the performanceof official

duties.


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Earlier Rules: Where car is used for official purposes , not a perquisite

and hence not taxable.

Where maintenance & running expenses are met by employer

if car is used wholly for official purposes, nil


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provided the documents as specified in Note A above are maintained

by employer.

Earlier Rules:Where car is used for official purpose only , and

expenses are met by the employer, this will not amount to perquisite.

New rules for valuation of perquisites do not specify the treatment

under this case, hence old rules can be taken as the base for valuing

this perquisite.

Earlier Rules: If reimbursed for official use only , then not taxable.

Where expenses are met or reimbursed by employerfor the use for

official purposes, no value is taxable provided documents specified in

Note A above are maintained by the employer.

Earlier Rules:

Where expenses are reimbursed for the official use only , not taxable.

Exempt from tax under S.10(5) maximum upto twice in a block of 4

years.

(Current block- 1st January 2002- 31st December 2005)Exemption is

available for actual amount spent on travel to any place in India for

himself and his family as provided in Rule 2Bof Income Tax Rules.

If paid on retirement whether on superannuation or otherwise, amount

is exempt from tax to the extent of least of the following:


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a. Cash equivalent of leave salary in respect of period of earned leave

to the credit of an employee only at the time of retirement whether on

superannuation or otherwise.

b. 10 months average salary.

c. The amount not chargeable to tax as specified by Government

from time to time (at present Rs. 300,000/-)in case of employees

retire whether on superannuation or otherwise on or after 1.4.1998

d. Leave encashment actually received on retirement.

It shall not be a perquisite in the following cases

1. Free meals provided by the employer during office hours at office

or business premises or through paid vouchers which are not

transferable and are usable only at eating joints,if the value thereof in

either case is upto Rs.50 per meal.

2. Tea or snacks provided during office hours.

3. Free meals during working hours provided in a remote area or an

offshore installation.

Earlier Rules:

Refreshments/subsidised lunch or dinner

Exempt when provided in the office premises during workinghours. An

amount upto Rs. 35 per day if provided outside the place of work and

amount is paid by employer directly to caterer,restaurant etc. is

exempt.Contribution by an employer to recognised Provident Fund is exempt

upto 12% of salary.

For employees covered by the Payment of Gratuity Act:

Any gratuity received by employee is exempt from tax to the extent ofleast of the following:

1. 15 days salary for every completed year of service or part thereof in

excess of 6 months.

2. Rs. 3,50,000/-

3. Gratuity actually received.

In case of other employees:Any other gratuity received by an employee

on retirement, death, termination, resignation is exempt from tax to the

extent of least of the following:

1. Rs. 3,50,000/-

2. Half month's salary for each completed year of service.

3. Gratuity actually received.

Any provision for gratuity in the books of accounts by the company for

the benefit of employees is not taxable during the tenure of service of

the employees.


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Not Taxable

1. Medical insurance taken by the employer for the employee or any

member of the employee's familyor any reimbursement to employee

of insurance premium which he has incurred is exempt.

2. Reimbursement by employer, of expenses incurred by employee

on his medical treatment or that of any other member of his family in

any hospital maintained by Govt. or in a hospital approved by Govt. or

where payment is made by the employer directly to hospital etc.

approved by the Chief Commisioner of Income Tax in connection with

treatment of prescribed diseases orailments of employee or any

member of his family is exempt.

Reimbursement of such expenses are exempt upto Rs.15,000/- when

the expenditure is actually incurred by the employee.


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The value of accommodation in a remote area provided to an employee

working at a mining site or an on-shore oil exploration site or a project

execution site or at offshore site will not be treated as perquisite Aremote area means an area located at least 40 KM away from a town

having a population not exceeding 20,000 . A project site means a site

of project upto the stage of its commissioning. Off-shore site do not

have to meet the requirement of distance.

Note: No value would be charged if loans are made available for

medical treatment in respect of diseases specified in prescribed Rules

and where loans are petty, not exceeding in the aggregate Rs. 20,000/-

.

Earlier Rules:

Any such benefit given to employee is not taxable.

Premium amount paid by employer is exempt

No perquisite where the value is upto Rs. 5,000/- in aggregate during

the financial year.

However, gifts made in cash or convertible into cash, like gift cheques

etc. will be taxable as perquisite.


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Earlier Rules:

Not provided in the Earlier Rules. Should be taxable.

Earlier Rules:

If such benefit is used for official purposes, nothing would betaxable.

Earlier Rules:

Exempt where provision by any undertaking (employer) engaged

incarriage of passengers or goods, to employeefor free or at

concessional fare, where conveyance is owned bysuch undertaking.

Earlier Rules:Not taxable where travel for official purposes.


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Amount spent by employer for training/educating employee is exempt.

Where expenses are incurred wholly and exclusively for official

purposes, the amount is not taxable provided the following conditions

are fulfilled:

complete details in respect of expenses including the dateand nature

of expenses, are maintained;

a employer gives a certificate that expenditure is incurred wholly and

exclusively for performance of official duties;

Educational facilties to children of employee in educational institution

maintained and owned by emmployer or in any institution by reason of

his being in employment of that employer.Not taxable if value of such

benefit per child does not exceed Rs. 1000/- per month.


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If such expenditure is incurred wholly and exclusively for business

purposes, the amount is not taxable and the followed conditions are

fulfilled:

complete details in respect of expenses including the datenature of

expenses and its business expendiency, are maintained;

the employer gives a certificate that the expenditure

is incurred wholly and exclusively for performance of official duties.

Where use of health club, sports and similar facilties are provided

uniformly to all employees by the employer, no amount is taxable.

Earlier Rules:

Club Membership provided to an employee by the employer purely for

business purposes may not be considered as taxable in the hands of

employees.The value of any benefit provided by a company free of cost or at a

concessional rate to its employees by way of allotment of shares,

debentures or warrants directly or indirectly under any Employees

Stock Option Plan or scheme by the company offered to employees in

accordance with the guidelines issued in this behalf by the Central

Government, is not taxable

Where Employer at its option pay tax on the whole or part value of

perquisite (not provided for by way of monetary payments), on behalf

an

employee, without making any deduction from the income of the

employee, such amount of tax so paid by employer shall not be treated

as perquisite in the hands of the employee.


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Taxable

Taxable

Taxable

Taxable

Taxable

Taxable

Please refer tax treatment at S.No.16,17,18 & 19

Taxable

Taxable

Taxable

Where car is used for official and personal purposes:

Expenses are fully met or reimbursed by the employer,

where cubic capacity of engine does not exceed 1.6 litres,Rs. 1200/-

/ if exceeds 1.6 litres, Rs. 1600/- (+Rs. 600. If chauffeur is also

provided),

Where expenses for private use are fully met by the employee,


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where cubic capacity of engine does not exceed 1.6 litres, Rs. 400/-

if exceeds 1.6 litres, Rs. 600/- (+Rs. 600. If chauffeur is also

provided),

Where car is used for personal purposes Expenses incurred by

employer on running and maintenance of car plus value of normal

wear and tear plus remunerationpaid to chauffeur less amount

charged from employee, if any.

Where one or more car are owned or hired by the employer and the

employee or member of his household are allowed the use of such

motor car or all or any of such motor car(otherwise than for official

duties), value of perquisite shall be amount calculated in respect of

one car as if the employee had been provided one motor car for use

partly inperformance of his duties and partly for private purposes

and the amount calculated in respect of other car, as if provided

exclusively for private purpose.

Normal wear and tear shall be taken at 10% p.a. of the acutal costof the motor car.

Earlier Rules:

When car is owned or hired by the employer and is used partly for

official and partly for private purposes and the running &

maintenance expenses are met by the employer and it is difficult to

identify value of private use then the perquisitevalue will be Rs.600

p.m./Rs.800 p.m. where h.p. rating does not exceed16/ exceeds 16

(plus Rs.300 p.m. where chauffeur is provided)

When car is used for private purpose,Amount actually incurred by employer for running & maintenance of

the car, normal depreciation, if it is owned by the empoyer or hire

charges, if car is hired and remuneration paid to chauffeur is

taxable

Where one or more cars as owned or hired by the employer are

allowed to be used by the employee (otherwise than wholly and

exclusively for official duties), value of perquisite shall be amount

calculated in respect of one car as if the employee had been

provided one motor car for use partly in performance of his duties

and partly for private purposes.

Where maintenance and running expenses are met by employer, if

car is partly used for officialpurposes and partly for privatepurposes, subject to Note B below, the actual expenditure incurred

by employer as reduced by Rs. 1200/- /Rs. 1600/- depending upon

the cubic capacity of engines and Rs. 600/- for chauffeur, if

provided.

Note B:


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Where the employer or the employee claims that the motor caris

used wholly and exclusively in the performance of official duty or

that actual expenses on the running and maintenance of the motor

car owned by the employee for official purposesis more than the

amounts deductible as mentioned above he may claim a higher

amount attributable to official use and the value of perquisite shall

be actual amount of charges met by employer as reduced by such

higher amount attributableto official use of the vehicle provided

conditions in Note A above are fulfilled.

If used for private purpose only, then actual amount spent on

running, maintenance & normal wear and tear is taxable.

Earlier Rules:Where car is owned by employee and used for

official and private purposes and expenses are met by employer, a

reasonable proportion of the sum actually spent by the employer

attributable to personal use is taxable.Where car is used for private

purposes only , actual expenditure of the employer is taxable.

New rules for valuation of perquisites do not specify the treatment

under this case, hence old rules can be taken as the base for

valuing this perquisite.

Earlier Rules:If used for private purpose only , then actual amount

spent on running, maintenance & normal wear and tear is taxable.

If used partly for official and partly for private purpose , areasonableproportion of the amount actually spent by the employer

for running,maintenance & normal wear and tear is taxable.

Where car is used for official and private purposes, subject to Note

B above, the actual expenditure incurred by employer as reduced

by Rs.600/- .If used for private purpose only, then actual amount spent on

running, maintenance & normal wear and tear is taxable.

Earlier Rules: Amount reimbursed by the employer for private

purpose is taxable. Amount reimbursed by the employer for the

use of official & private purpose , a reasonable proportion of theamount reimbursed is taxable.

Taxable if paid during continuance of employment.


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Otherwise the amount of expenditure incurred by the employer is

taxable.

Any gratuity paid to an employee while still in service is

taxable.


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Expenses on telephones including mobile phone actually incurred

on behalf of employee by employer shall not be taxable in the

hands of employee.Earlier Rules:May be considered as exempt

depending upon the nature of job.

In case accomodation is in cities having populationexceeding 4 lacs

- 10% of Salary7.5% of Salary in other cities.

In respect of period for which accommodation was occupiedby the

employee, as reduced by the amount of rent if any, paid by

employee.

Actual amount of lease rental paid by employer or 10% of salary,

whichever is lower as reduced by the rent, if any, actually paid by

the employee.

The value of perquisite, as determined in either of the cases above,

is increased by 10% of cost of furniture (p.a.) (including television

sets, radio sets, refrigerators, other household appliances, air

conditioning plant or equipment or other similar appliances) or if

furniture is hired, the hire charges, as reduced by the amount, paid

by employee.

24% of salary or actual charges to the hotel, whichever is lower, for

the period during which such accommodation isprovided as

reduced by the rent,if any, paid by employee.

Earlier Rules:In case accommodation is in Delhi, Bombay, Calcutta & Madras (or

in other cities):

1. If fair rent is less than 10% of salary, fair rent is taxable.

2. If fair rent is 10% of salary or more but not more than 60%

ofsalary (50% in case of other cities), 10% of salary is taxable.


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3. If fair rent exceeds 60% of salary, (50% in case of other

cities),fair rent minus 50% of salary (40% in case of other cities)

is taxable.

If any furniture is also provided by the company to the employee

then either 10% of original cost of assets purchased or any hire

charges paid for furniture, whichever is applicable, shallbe added to

the cost of such accommodation.

Where accomodation is provided at concessional rent, the

valuation will be made as if employee had been provided rent free

accomodationand amount so computed will be reduced by rent

payable by employee.

Where employer has provided sweeper, gardener,

watchman,personal attendant, the actual cost to the employer shall

be taxable as perquisite which is total amount of salary and

allowances paid to them as reduced by amount paid by employee.

Earlier Rules:

a. When sweeper, watchman or gardener are recruitedandremunerated by employer- Rs. 120 p.m. per person is

taxable.However, if employed by employee and the amount paid to

such persons is reimbursed by employer to employee, then the

entireamount so reimbursed is taxable in the hands of employee.

b. Any other servants, entire amount spent on other servants is

taxable.

Sum equal to simple interest @ 10% p.a. in respect of loans for

house and conveyance and @ 13% p.a. for other loans on

maximum outstanding monthly balance (aggregate outstanding

balance for each loan as on the last day of each month)

Value of perquisites shall be sum equal to the amount of giftor

voucher or token in lieu of which such gift may be received by the

employee or by member of his household on ceremonial occasions

or otherwise.


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Where supply is made from resources owned by the employer

without purchasing them from any other outside agency,

manufacturing cost per unit incurred by employer. Where supply is

made by purchasing from outside agency, amount paid to supplying

agency is taxable less any amount paidby the employee.

Earlier Rules:

Where employer has supplied gas, electricity & water from own

sources, not taxable

Where provided by purchasing from outside agency,any such

benefit provided and used partly for official andprivate purposes

will be taxable @ 6.25% of salary or the actualamount spent

whichever is less.

If such benefit is used for private purposes, amount actuallyspent

is taxable.

Provision by any undertaking engaged in carriage of passengers or

goods to employee or to any member of his household for free or atconcessional fare, in any conveyance owned, leased or made

available by any other arrangement by the undertaking, value at

which such benefit or amenity is offered by such undertaking to the

public as reduced by amount recovered from employee.

Note: This sub rule is not applicable to the employees of

railways from 1.4.2001.

Where such expenses are borne or reimbursed by employer for any

holiday other than leave travel allowanceavailed by employee or

member of his house, amount incurred by employer.

Where such facility is maintained by employer and is not available

uniformly to all employees, value at which suchfacilties are offered

by other agencies to the public.

Where employee is on official tour and expenses are incurred in

respect of any member of his houseaccompanying him, amount of

such expenses.

Where official tour is extended as a vacation, value shall be limited

to expenses incurred in relation to such extended period of stay or

vacation

Value shall be determined @ 10% p.a. of actual cost of such asset

or amount of rent or charge paid or payable by employer.


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Actual cost of asset to employer as reduced by normal wear and

tear @ 10% of such cost for each completed year during which

asset was put to use by employer.

Actual cost to employer as reduced by normal wear and tear @

50% by reducing method.

Actual cost reduced by normal wear and tear @ 20% by the

reducing method.

Earlier Rules:Tax may be computed on the written down value at

which the asset istransferred as reduced by the amount recovered

from the employee.

Amount spent by employer for free or concessional educational

facilties for any member of employee's household is taxable.

Education facilties to employee's family members in institution

maintained by employer or in any other, educational institution byreason of his being inemployment of that employer . Cost of

education in a similar institution in or near the locality shall be the

amount ofperquisite.

Earlier Rules:

Reimbursement of expenditure incurred for education of family

members of employee is fully taxable.

The amount of expenses including membership fees and annual

fees incurred by the employee or member of his household charged

to a credit card including add-on card,provided by employer or

otherwise, paid for or reimbursed by employer shall be taken as

value of perquisite.

Earlier Rules:

Taxable where used for private purposes.


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Actual amount of expenditure including annual or periodical fee or

incurred by employee or by any member of his household.

Where corporate membership of club is obtained by employer,

which is enjoyed by employee or any member ofhis house, value of

perquisite shall not include initial fees paid for acquiring corporate

membership.

Any profit and gains arising from the transfer of

shares/debentures/warrants alloted under ESOP shall be

chargeable to income tax under the head 'capital gains' and shall be

deemed to be income of previous year in which transfer took place.

Any other benefit, amenity, service, right or priviledge provided by

the employer shall be determined on the basis of cost to the

employer as reduced by employee's contribution, if any.

The tax if borne by employer on the remuneration of technician,

shall now be taxable in the hands of such technician.

Earlier Provisions:

The tax so borne by employer was not included in the computation

of

total income of technician and thus was exempt from tax.

The amount of passage money etc. so provided to the employees


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