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Allowances Exempted Under Section 10 of
Income Tax Act
1. House Rent Allowance (HRA)
You get a job and shift
to another city. Because of your job, you live in a different place. You are
forced to live in a rented accommodation. The rented flat is not by choice but
because of the duty. Hence, the expense on rent is because of your job. You
can’t avoid this, even if you wish. Therefore, government exempt the rent from
income tax. However, your employer must pay the house rent allowance.
Exemption
of HRA is a minimum of these three.
a.
Actual
HRA received.
b.
Rent
paid less 10% of salary.
c.
40%
of Salary (50% in case of Mumbai, Chennai, Kolkata, Delhi
Click here to downloadAutomatic HRA Calculator
Leave Travel Allowance
LTC or LTA is exempted if the
same is actually spent
Transport Allowance
You daily go to your office
or workplace from you house. You also spend on the local transport. This
expenditure is also forced upon you. Therefore, the government has exempted
transport allowance from the income tax, provided your employer gives you the
transport allowance.
You don’t need to give any receipt of this local
travel. However, the tax exemption is Rs 1600/month,
and Phy.disable person Rs. 3200/- P.M.
Children Education Allowance
Children Education allowance
in also exempted from income tax. Your employer must give this allowance for
availing the tax exemptions. It is Rs. 100 per month per child up to a
maximum of 2 children.
Hostel Subsidy
This is another tax exemption
related to your child’s education. It is Rs. 300 per month per child up to
a maximum of two children.
Other Allowance Eligible For Income Tax exemptions
Uniform Allowance, Special
Compensatory Allowance, High Altitude Allowance, allowances applicable to North
East, Compensatory Field Area Allowance, Counter Insurgency Allowance,
High Active Field Area Allowance, island duty allowance, tribal allowance etc.
These allowances are tax-free, but you need to produce the proof of
the actual expense in some cases.
Income Tax Exemption on Interest
Paid on Housing Loan
This Exemption is also related to your accommodation
because of the job. After shifting to a different place, you may opt for
your own house instead of rented accommodation. If you take home loan for
the house, the interest payment is tax exempted. You can get maximum exemption of Rs 2 lakh on housing loan
interest U/s 24B. There are some conditions for this
exemption.
The house should be
self-occupied. You may get this exemption if your home is under
construction. however the construction should complete within 3
years.
Tax Deduction Under Section 80C
The Government wants to
encourage some certain types of investments and expenses. To achieve this goal
it gives the benefit of tax deductions. There are many investments and expenses
under section 80C, 80CCC and 80CCD. However, the total deductions under this
section are limited to Rs 1.5 lakh.
Deductions Under Chapter VIA of Income
Tax Act
Section 80CCG: Rajiv Gandhi Equity
Saving Scheme (RGESS)
This scheme also gives you the extra tax saving. To
avail this benefit, you must be the first-time investor in the share market.
Your annual income should not be more than Rs 10 lakh. You can invest up to Rs
50,000 under this scheme. However, the tax deduction would be available for the
50% of your investment. So, if you invest Rs 50,000, you will get the tax
deduction of only Rs 25,000. There is some mutual fund scheme which is designed
for RGESS. However, due to the complex rules, it could not become popular.
Section 80D: Medical Insurance Deduction
One must use this tax saving opportunity. In the
budget 2015 the government does not change income tax slab, but it has increased the limit for section
80D.Section 80D can give you a tax deduction of up to Rs 55,000/- [
for below 60 years Rs. 25,000/- and above 60 years Rs.30,000/- ( Total Rs.
55,000/-)]. Medical insurance of self, family and parents are eligible
for tax deduction under section 80D.
Section 80DD: Deduction For Maintenance of Disable
Dependent
Under this section, one can
get extra tax deduction of Rs 50,000. To avail this deduction, you must fulfill
some conditions.
1. A person with
a disability must be dependent upon you. The disability may be
physical or mental.
2. You must produce a
certificate from the doctor.
3. You must incur the expense
of treatment, rehabilitation, nursing and training.
If you deposit any amount in
any scheme for the disabled, it would be also eligible for tax deduction.
If dependent person is with
severe disability, you can claim deduction up to Rs 1,00,000.
Section 80DDB: Serious Illness Deduction
This deduction is for the
treatment of serious illness. An assessee can get an income tax deduction of Rs
80,000 under this section.
1.
The deduction is
for the expense of illness of self or dependent.
2.
The illness
should be within the prescribed list.
3.
There should be
real expense. Any reimbursements of insurance claims should be subtracted.
4.
You must give a
certificate from the government doctor.
5.
For senior
citizens this deduction limit is Rs 80,000.
Section 80E: Deduction on Loan for Higher Studies
Like the home loan interest,
one can also claim income tax deduction for education loan interest.
1.
You must take
education loan from a financial institution.
2.
You can avail
this tax deduction maximum of 7 years.
3.
You can take the
benefit of this deduction only for the higher education.
4.
You can take
this benefit only for the education of self, spouse or children. If you are the
legal guardian of a student, you can also take this benefit.
Section 80G: Deduction for Donations
The donations specified in Section 80G are
eligible for deduction. The deduction may of 100% of donation or 50%, It
depends upon the type of receiver.
Section 80GG: Deduction on House Rent Paid
This deduction is for those,
who don’t get the house rent allowance from their employer. Such person can
avail this deduction according the specified rules. Max Limit Rs. 24,000/- P.A.
Section 80TTA: Saving Account Interest Deduction
Interest earned on a saving
account is not added in taxable income, if it is less than Rs 10,000 in a
financial year.
Section 80U: Deduction For Disabled
Under section 80U a person
with disability gets extra deduction from his/her taxable income. Such person
can deduct Rs 75,000 from the taxable income. In case the disability is severe,
the deduction is up to Rs 1,25,000. To avail this deduction one should obtain a
certificate from the government doctor.
