The various Income Tax Exenwtions for Salaried Employees have been mentioned below These Income Tax Exemptions for Salaried Employees are highly advisable to everyone as they help ii saving tax legally thereby reducing the tax burden on the Salaried Employee.
1. HRA EXEMPTION FOR SALARIED EMPLOYEES:
Income Tax is only levied on the remaining part HRA Exemption is one of the most useful income tax exemptions for Salaried Employees as it can be easily claimed and the amount of exemption allowed is also large. House Rent Allowance given by an employer to an employee is exempted from the levy of the Income Tax.
2. INCOME TAX EXEMPTION ON LEAVE TRAVEL ALLOWANCE:
The amount given by the employer to an employee to go on a vacation which is also called travel allowance is exempted from tax but this to a certain extent, provided that the amount given was for a vacation in India only and the employee actually goes on a vacation (as bills for the same would be required to be furnished).
3. ENCASHMENT OF LEAVES FOR SALARIED EMPLOYEES:
It may also happen that employers give their employees a certain no. of days which can be claimed as leaves else they will en-cash to these leaves i.e. an extra pay to the employees for the leaves which were allowed to be taken but were not taken, on which exemption up to a certain extent can be claimed.
4. PENSION INCOME FOR SALARIED EMPLOYEES:
On retirement of an employee many employers pay a pension to their employees Sometimes, the employer pays pension from his own pocket and m some cases the employer purchases an annuity and then the pension is being paid by the organization from whom the annuity has been purchased.
The Pension can be of 2 types- Commuted and uncommuted. Irrespective of the type of Pension Income Tax Exemption is given in both types of pensions up to a certain limit. In uncommuted Pension, the whole amount of pension is paid in installments at regular intervals whereas in commuted pension, the amount is received in lump-sum.
5. GRATUITY FOR SALARIED EMPLOYEES:
Gratuity is a gift made by the employer to the employee in appreciation of the past services rendered by the employee. Gratuity can either be received by:
1. the employee himself at the time of his retirement
2. The legal heir at the time of the death of the employee
For the purpose of computing Income Tax Exemptions for Salaamed Employees who have received gratuity, the employees can be segregated into 3 parts and then the exemption is allowed depending on the category they are into:
1. Govt. Employees and employees of Local Authorities
2 Employees covered under the Payment of Gratuity, Act 1972
3. Employees not covered in any of the 2 above.
6. VRS RECEIVED:
Many employees opt for voluntary Retirement before the actual age of retirement (I e 60 years) In such cases, the employer sometimes gives some money to the employee on his voluntary retirement
The amount received or receivable by the employee on voluntary retirement under the golden handshake scheme is exempted under Section 10(10C).
Some employers also give their employees various perquisites/facilities like Car, Mobile phones, Rent Free accommodation.
A specific value of such facilities is allowed as an exemption and value of the balance facilities allowed is allowed as an exemption and hence, perquisites are not fully tax free.
8. VARIOUS ALLOWANCES:
Allowances like Children Education Allowance and Transport Allowance are also allowed to Salaried Employees as Income Tax Exemptions but only up to a certain limit.