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.

HRA Exemption

HRA allowance received by the employee

-
- Actual rent paid – (10% of Basic + D.A.)
- Or 50% of (Basic + D.A.) in case the location is (Mumbai, Kolkata, Chennai, Delhi) or 40% of (Basic + D.A.) in case of other cities.

Whichever is less of the above three.

Conveyance Exemption

Maximum Exempted up to Rs. 9600 p.a. (i.e. Rs. 800 per month when paid along with the salary)

Medical Exemption

Maximum Exempted up to Rs. 15,000 p.a. based on the bills produced by the employee (i.e. Rs. 1,250 per month when paid along with the salary)

Education Exemption

Maximum Exempted up to Rs. 2,400 p.a. based on the number of dependent children's declared by the employee (i.e. Rs. 200 per month when paid along with the salary)

Telephone Exemption

Maximum Exempted up to Rs. 18,000 p.a. based on the bills produced by the employee (i.e. Rs. 1,500 per month when paid along with the salary)

Petrol and Vehicle Maintenance Exemption

For Car: Rs. 1,200 p.m. * 12 months = Rs. 14,400
For Driver: Rs. 600 p.m. * 12 months = Rs. 7,200

Regards

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.