Tax-Free Allowances: Can You Help Me Understand What's Exempt and the Limits?

Certainly! Here is the revised text:

"Can you help me out with which allowances are exempted from tax and up to what limit?"

Hi,

1. HRA - 100% Tax exemption (Lease document Mandatory)
2. Conveyance - Rs. 800 per month
3. Books - 100% tax exemption
4. Educational Allowance - 100% tax exemption
5. Medical Reimbursement - Rs. 15,000 per annum

Thanks & Regards,
Murty

Hi Ruhi,

The contents of the salary breakup may be as below. You can prepare it according to your own suitability. HRA would be 50% or 60% of basic.

Basic

HRA: 40-60% is exempted from taxes. It depends on the class of the city.

CCA - 825/- is exempted from tax.

Other Allowances:

- Mobile Reimbursement
- Medical Reimbursement of 1250/month is exempted from tax

Gross Per Month = Sum of all the above.

Gross Per Annum = 12 * Gross/Month

PF Contribution = 12% of Basic/Annum

ESI Contribution = 4.75% of Gross/Annum

Medical: The mediclaim facility provided to employees who are not covered under ESI, as the maximum ceiling for ESI is 10000/Month. Getting more than this will be covered under Mediclaim, or it depends on the company policy.

Ex-Gratia/Bonus = A fixed amount as a bonus.

Annual Fixed Gross Cost = Gross/Annum + Ex-gratia

Annual Total Cost = AFGC + PF + ESIC

Annual total cost is also called CTC.

Apart from this, Food coupons, Holiday packages, and Furnishing items are included in their CTC.

Hope this helps you to clear your queries to some extent.

Regards,

Amit Seth.

Hi,

Amount reimbursement is also a part of taxable salary but they are exempted from taxes up to a certain level. Telephone bills, petrol, driver, and vehicle maintenance bill amounts are completely tax-free. If not, then to what extent?

- Telephone bills - 30,000/- per annum
- Petrol - 72,000/- per annum
- Driver salary - 60,000/- per annum
- Vehicle maintenance - 25,000/- per annum

LTA
Books and Periodicals - 25,000/- per annum

Hope this information is sufficient regarding the same.

Regards,
Amit Seth

Non Taxable components of salary:

1)Education Allowance:

„« exempted for upto 2 school going childrens

„« Rs 100 per month for each child

„« No FBT to be paid by the Employer

2) Medical Allowance :

„« Maximum limit : 15000 per year / 1250 per month

„« Provided submit bills

„« FBT to be paid by the Employer

3)Lunch Allowance:

„« Rs 50 for each working day: 22*50= 1100(max limit)

„« FBT to be paid by the Employer

4) LTA

„« To be claimed twice in a block of 4 yrs, Once in 2 yrs

„« 2 journeys in 4ys block

„« eligible members(Self,spouse,2 kids, dependent parents)

„« eligible mode of transport:

„« Air fare

„« 1st AC tickets subject to direct journey

„« Road: calculated as per 1st AC¡¦s fare for the to & fro destination

„« Provided submit bills

„« Rest amt left after submitting the bill wud be added to employees income and hence becomes txable.

„« Blocks for LTA: Calculated As Calendar Year

1) 86 ¡V 89

2) 90 ¡V 93

3) 94 ¡V 97

4) 98 ¡V 01

5) 02 ¡V 05

6) 06 - 09

Conveyance:

„« Exemption limit upto 800 pm

„« If co provides personal vehicle than taxable, if not than non taxable

HRA:

„« If Employee Is Paying Rent Than Non Taxable

„« Calculation:

„« Rent ¡V 10% of basic

„« 50 % of basic

„« 60% of basic (as per type of city)

„« apart fom the eligible amt rest amt wud be taxable.

Housing Loans:

a)Principle Amt:

exemption of Rs 1 lac under 80 C(including LIC,PF etc)

b) Interest:

„« exemption of 1.5 lacs if self occupied

„« If on rent : exemption of 2.5 lacs ¡V provided show rent receipts.

c) Loan for repair:

Exemption Upto 30,000. ¡V No Claim Under 80 C

FBT Calculation:

FBT is paid by the employer, Non taxable income of the employee (income wic is exempted except edu all is FBT for the Employer) Taxable Income of employee no FBT to employer.

(x) ¡V total amt

on 20% of (x) 33.99% to be calculated as FBT

eg

for 2000

20% = 400 RS

33.99% OF 400 = 33.99 is FBT.

FBT paid on following Reimbursements

„« Telephone Reimb

„« Petrol

„« Vehicle maintainence

Components such as reimbursements like fuel, books, Sodexo, medical, etc. may attract Fringe Benefit Tax (FBT), either borne by the employer or by the employee (included in CTC). For example, 20% of the amount being taxed at 33.33%.

Sodexo vouchers worth 10,000 per annum for FBT will be calculated as follows: (1000 * 20%) * 33.33% = 660 per month.