Components of Allowances Under the Income Tax Act
As per the Income Tax Act and practices, we are using some components like Medical Allowance, Uniform Allowance, Children Education Allowance, Housing Rent Allowance, and Conveyance Allowance.
First, please confirm which components your employer is using.
Details of Allowances
- Medical Allowance: Up to Rs. 1,500 yearly (requires a medical bill) is exempt.
- Uniform Allowance: Exempt to the extent of expenditure incurred for official purposes (e.g., factory worker).
- Children Education Allowance: Up to Rs. 100 per month per child, up to a maximum of 2 children, is exempt.
- Housing Rent Allowance: As per eligibility.
- Conveyance Allowance: Up to Rs. 1,600 per month (Rs. 3,200 per month for blind and handicapped employees) is exempt.
Regards,
Nagesh More
From India, Mumbai
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As per the Income Tax Act and practices, we are using some components like Medical Allowance, Uniform Allowance, Children Education Allowance, Housing Rent Allowance, and Conveyance Allowance.
First, please confirm which components your employer is using.
Details of Allowances
- Medical Allowance: Up to Rs. 1,500 yearly (requires a medical bill) is exempt.
- Uniform Allowance: Exempt to the extent of expenditure incurred for official purposes (e.g., factory worker).
- Children Education Allowance: Up to Rs. 100 per month per child, up to a maximum of 2 children, is exempt.
- Housing Rent Allowance: As per eligibility.
- Conveyance Allowance: Up to Rs. 1,600 per month (Rs. 3,200 per month for blind and handicapped employees) is exempt.
Regards,
Nagesh More
From India, Mumbai
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Dear Mukesh, please find the attached House Rent Allowance (HRA) exemption calculation. If you're a salaried individual, you can claim House Rent Allowance (HRA) to meet your rented accommodation-related expenses. Salaried individuals who live in a rented house can claim this exemption and bring down their taxes. HRA can be fully or partially exempt from tax. Our HRA exemption calculator will help you calculate what portion of the HRA you receive from your employer is exempt from tax and how much is taxable. If you don’t live in a rented accommodation but still get house rent allowance, the allowance will be fully taxable.
The entire HRA received is not always fully exempt from tax. The least of the following three will be taken to exempt from tax:
- HRA received from your employer
- Actual rent paid minus 10% of salary
- 50% of basic salary for those living in metro cities
- 40% of basic salary for those living in non-metro cities
For example:
Mr. ABC lives in Mumbai. His basic salary: Rs 50,000 per month, Rent he pays: Rs 15,000 a month. The HRA exemption he would get would be the least of the following:
"Head Amount
1.) 50% of basic salary Rs 25,000
2.) HRA received Rs 15,000
3.) Excess of rent paid over 10% of salary Rs 1,75,000
The least of the above three is exempt. Hence, exemption would be Rs 15,000."
Regards,
Nagesh More
From India, Mumbai
Acknowledge(0)Amend(0)
The entire HRA received is not always fully exempt from tax. The least of the following three will be taken to exempt from tax:
- HRA received from your employer
- Actual rent paid minus 10% of salary
- 50% of basic salary for those living in metro cities
- 40% of basic salary for those living in non-metro cities
For example:
Mr. ABC lives in Mumbai. His basic salary: Rs 50,000 per month, Rent he pays: Rs 15,000 a month. The HRA exemption he would get would be the least of the following:
"Head Amount
1.) 50% of basic salary Rs 25,000
2.) HRA received Rs 15,000
3.) Excess of rent paid over 10% of salary Rs 1,75,000
The least of the above three is exempt. Hence, exemption would be Rs 15,000."
Regards,
Nagesh More
From India, Mumbai
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Salary Calculation 10-11.xls
IT.SEC.10(14)-S alary & allw. exemption under IT Act. Sec.10(14).docx