What allowances are to be exempted from salary for income tax purposes?

Answer 1

Any allowance in the nature of reimbursment of expenditure such as Travelling Allowance is exempted. House rent allowance is exempted if actual rent paid is more than the allowance plus ten percent of salary.

Answer 2

Without mentioning the financial year, it is not correct to tell you the allowances that are exempted from salary for I.T. purpose. The question should be like this for the financial year 2005-06, what are allowances that are exempted from salary for I.T. purpose.
Our government ( Indian ) try to reduce exempted allowances from the salried class every year. They also study various matters related to salaried employees so as to remove them from the exempted catagory or to tax the allowances in a new method. For example, the Fringe Benifit Tax imposed on the Employees Stock Option in the recent budget presented by our F.M.
Every year some exemption will be removed and some new burden in the shape of a new tax will be imposed on the salaried class as they are the only catogery who pay 100% taxes without any murmur, and their representation is minimal in the enacting bills to protest.

Answer 3

THe allowance are as under.
travelling
dearness
conveyance
trainning
house rent allowance
transport
children education allowance
children hostel allowance
lunch allowance
entertainment allowance
uniform allowance
health allowance
academic allowance

Answer 4

*house rent
*general provident fund
*gis
*premium of lic policies
*education fee of 2 children upto a maximum of Rs.24000-00
*charities , gifts and other items coming under section 88 i.t.
*pay back of house rent and some other listed instalments
*n.s.c's and interest accrued on them.

Answer 5

*house rent (HRA)
*general provident fund GPF
*gis
*premium of lic policies
*education fee of 2 children upto a maximum of Rs.24000-00
*charities , gifts and other items coming under section 88 i.t.
*pay back of house rent and some other listed instalments
*n.s.c's and interest accrued on them.

Answer 6

Refer to link below and refer to All About TDS from Salaries
http://allindiantaxes.com/index.php

Answer 7

EXEMPTIONS OF INCOME

RELEVANT FOR THE HEAD "SALARIES"

It is not true that every income received by an employee from his employer is taxable. Any income falling within any of the following paragraphs shall not be included in computing the income from salaries: -

(1) The value of any travel concession or assistance received by or due to an employee from his employer or former employer for himself and his family, in connection with his proceeding

(a) on leave to any place in India or

(b) on retirement from service, or, after termination of service to any place in India is exempt under clause (5) of Section 10 subject, however, to the conditions prescribed in rule 2B of the I.T. Rules, 1962.

(2) Death-***-retirement gratuity or any other gratuity which is exempt to the extent specified from inclusion in computing the total income.

(3) Any payment in commutation of pension received under the Civil Pension (Commutation) Rules of the Central Government or under any similar scheme applicable to the members of the Civil/Defense services under the Union/State/Local Authority or a Corporation established by a Central, State or Provincial Act. Payments in commutation of pension received under any scheme of any other employer, exemption will be governed by the provisions of Section 10(10A) (ii).

(4) Any payment received by an employee of the Central /State Government, as cash-equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement on superannuation or otherwise, is exempt. In the case of other employees it is subject to a maximum of ten month's leave. This exemption has an overall max. limit of Rs. 2,40,000 [S.0.1015 (E) dated 27.11.97).

(5) Under Section 10(10B), the retrenchment compensation received by a workman is exempt from income-tax subject to certain limits.

(6) Under Section 10(10C), any payment received by an employee of the notified bodies at the time of his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of public sector company, a scheme of voluntary separation, is exempted to the extent that such amount does not exceed five lakh rupees

(7) Any sum received under a Life Insurance Policy, including the sum allotted by way of bonus on such policy other than any sum received under sub-section (3) of Section 80DDA.

(8) Any payment from a Provident Fund to which the Provident Funds Act, 1925 (19 of 1925), applies.

(9) Under Section 10(13AJ of the Income-tax Act, 1961, any special allowance specifically granted to an assessee by his employer to meet expenditure incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee is exempt from Income-tax to the extent as may be prescribed.

(10) Under section 10(14) exemption of notified allowances is provided. The CBDT has prescribed guidelines for the purpose of classes (i) and (ii) of Section 10(14) vide Notification No.SO617(E) dated 7th July/ 1995 (F.No.l42/9/95TPL)which has been amended vide Notification SO No.403(E) dated 24.4.2000 (F,No.l42/34/99-TPL).

11) Under Section 10(15)(iv)(i) of the Income-tax Act, interest payable by the Government on deposits made by an employee of the Central Government or a State Government or a public sector company from out of his retirement benefits, in a notified scheme, is exempt.

(12) Income by way of pension received by an individual or family pension received by any member of the family of an individual who has been in the service of the Central Government or State Government and has been awarded 'Param Vir Chakra" or "Maha Vir Chakra" or "Vir Chakra" or such notified gallantry award, is exempt.

(13) Under Section 17 of the Act, exemption from tax will also be available, under prescribed conditions, in respect of any medical treatment provided to an employee or any member of his family or premium paid by the employer in respect of approved medical insurance taken for his employees or reimbursement of insurance premium to the employees for such medical insurance for the employee or his family members.