Tax exemption component for salaried employee


I'm going to join a new company and my annual salary is 16lac ...and I have freedom to decide my tax exemption component I want to know all the possible Tax exemption component and they upper limit.


asked Feb 14 '11 at 12:43 by erupama 6112

I have paid 17 lac in FY 2014-15 for a flat under construction in gaur yamuna city and not taken any loan.can I claim the rebate of Housing finance ? I am paying my medical bills/medicines.can I deduct these expenses from the taxable income ? I am self employed as a free lance consultant for paper mills & age 68.
(Mar 07 '15 at 14:41) aloke
If you have not taken any loan, you can't claim tax benefit for home loan. For a freelancer, there are no tax benefit available for medical bills/medicines.
(Mar 08 '15 at 22:42) Pankaj Batra

You may consider adding following components in your breakup.

  1. Conveyance allowance : non-taxable up to 800 per month. No proofs/bills required to submit.
  2. Medical Allowance : non-taxable up to 15000 per year on producing medical bills.
  3. Leave Travel allowance: 2 trips on a block of 4 years can be claimed and reimbursement will be non-taxable. There is no maximum limit.
  4. Children Education allowance: Per school going child 1200 per annum is non-taxable. Maximum for 2 children, so max 2400 per annum becomes non-taxable.
  5. Telephone Allowance: Amount is tax free if the phone is used for official purposes and bills submitted. There is as such no limit, but should be kept around 5-6000 per month maximum.
  6. House Rent allowance: Rent receipts can be shown for taking tax benefit for living in a rented house. Income tax exemption for HRA will be least of following:
    a) The actual amount of HRA received as a part of CTC
    b) 40%(if living in non-metro area) or 50% (if living in metro area) of basic salary.
    c) Rent paid minus 10% of basic salary
  7. Leased car: Employer may show car provided to employee, that employer has taken on lease from some outside person. No limit on lease amount, but this amount will not go in employee salary but will be paid to owner (which can be any person, be it employee's father/mother/brother/relative etc.). employees can provide any third party's car details, RC and PAN copy and a car lease on stamp paper. In this case, company will directly pay that third party car rent. So some part of salary will go to somebody else's account as car rent. All these increase employer's headache and there are TDS implications as well. Also the car rent income will be added to third party's income.
  8. Car maintenance expenses: Petrol/Diesel bills or service bills can be shown towards car maintenance. If car is self-owned and self-driven, max limit is 1800 (Upto 1600CC car) and 2400 (Above 1600CC).
  9. Meal coupons: Sodexho passes or any such meal vouchers are non-taxable, but upto 50 Rs per working day, that means 1100 per month (assuming 5 days a week).
  10. Driver Salary: No limit for company provided car, 900 per month for self owned car.
  11. Internet Expenses: If company provides internet at employee'e premise, it can be non-taxable.

answered Feb 14 '11 at 13:12 by Pankaj Batra 5.2k320


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Asked: Feb 14 '11 at 12:43

Seen: 25,522 times

Last updated: Mar 08 '15 at 22:42