Understanding Non-Taxable Salary Components: What Are They and How Do They Work?

Hi Daisy,

Could you please provide information on the non-taxable heads under salary?

Thanks.

HRAExemption

HRAallowance receivedbytheemployee


Actual rentpaid–(10% ofBasic+ D.A.)
Or

50%of (Basic+ D.A.) incasethelocationis(Mumbai,Kolkata,Chennai,Delhi) or40%of (Basic+ D.A.) incaseofother cities.

Whicheverislessoftheabove three.

ConveyanceExemption

MaximumExemptedu/s10uptoRs.9600p.a.
(i.e.@Rs.800 per monthwhenpaidalongwith the salary)

MedicalExemption

MaximumExemptedu/s10uptoRs.15000p.a.basedonthebillsproducedbythe employee
(i.e.@Rs.1250 per monthwhenpaidalongwith the salary)

EducationExemption:

MaximumExemptedu/s10uptoRs.2400p.a.basedonnoofdependentchildren's declaredbytheemployee
(i.e.@Rs.200 per monthwhenpaidalongwith the salary)

TelephoneExemption:

MaximumExemptedu/s10uptoRs.18000p.a.basedonthebillsproducedbythe employee
(i.e.@Rs.1500 per monthwhenpaidalongwith the salary)

PetrolandVehicleMaintenanceExemption

ForCar :Rs.1200p.m. * 12months = 14,400
ForDriver :Rs.600p.m. * 12months = 7,200

Dear Vivek,

The way you explained is really good about non-taxable heads for salary employees. Thank you very much for your useful information.

Regards,
Sravan

Hi,

Thank you for your response. Could you also advise if it is compulsory for a company to issue FORM 16 to employees who do not come under the taxable limit? Will a salary slip suffice?

Thanks,
Daisy

Even if the income is below the exemption limit, the individual has to file the returns. For filing the returns, Form 16 is required.

Hi,

Thank you for your response. Our CA informed us that a salary certificate will suffice in place of Form 16 for those employees who are below the taxable limit. Is that correct?

Please let me know if you need any further clarification.

Thank you.

Technically, the organization should issue Form 16 to each and every permanent employee, irrespective of their salary range falling within any band.