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Tax Exemptions And Deductions For Salary Income or Individuals


As an individual, we always prefer to save our taxes. The tax paid by a salaried person is deducted by the company as TDS. Though you should know about the following details to decrease your tax liability and enjoy the maximum possible savings. We would never prefer that our hard earned money has a major outflow because of tax payments. So, go through the Tax Exemptions And Deductions below to minimize the tax liability.

ALSO READ :- How To Avoid TDS On Interest Income From Your Savings Or Investments?

Exemptions: There was different types of allowances given by the company on which are fully or partially exempt from the tax. Apart from that you have different savings and investment schemes for tax benefit purposes. Let us see all these availabilities one by one.

Allowance Exemption

  • House Rent Allowance:Under Section 10 (13A), the house rent allowance is allowed for exemption which is minimum among the three mentioned below:
    • 50% of annual salaries for metro cities and 40% for other cities.
    • actual HRA received by the employee.
    • actual rent paid minus 10% of annual salary.
  • Medical Allowance: Medical allowance exemption of upto Rs 15,000 per year is allowed for the treatment of the employee or his/her family member which is reimbursed by the employer.
  • Conveyance Allowance: Under Section 10 (14) conveyance allowance of maximum Rs 800 per month for travelling between residence and home is exempt. If other conveyance allowances are provided for on job purposes, the complete amount of utilization is exempt.
  • Children Education Allowance: The exemption upto the limit of Rs 100 per child to the maximum of two children is allowed. Also, the exemption upto the limit of Rs 300 per child to the maximum of two children is allowed for hostel purposes.
  • Leave Travel Allowance: The travel allowance of shortest route by economy class air fare or first class air conditioned railway fare or actual amount spent whichever is less is exempted. The exemption is allowed for two journeys in a block of four years. The current block is Jan 1, 2010 to Dec 31, 2013.
  • Academic or Research Allowance: Actual amount spent for academic or research purpose is exempted.

Savings Exemption

  • Under Section¬† 80 C, the maximum exemption for Rs 1,00,000 is available. The amount can be invested in PPF, NCS, Life Insurance Premium, 5 year FD with banks or post offices, Mutual Funds, ELSS.
  • Under Section 80 CFF, investment in infrastructure bond upto Rs 20,000 is exempted.

Tax Exemptions And Deductions


[Image Credit: Flickr]

Deductions: Every year with the new budget government announces some new investment schemes which have tax benefits. It can be of different types. One in which the principal amount invested will be deducted from taxable income. Eg: Rajiv Gandhi Equity Saving Scheme. Second, the interest generated in exempted from tax. There can be other options as well. There are certain terms and conditions or time period which is to be fulfilled along with that. The maximum deduction through these savings can be upto Rs 1,00,000. Also, the principal payment for housing loan of maximum Rs 1,00,000 is deductible if there are no investments under section 80 C. Whereas the interest paid on EMI has a limit upto Rs 1,50,000 under section 24.

ALSO READ :- Rajiv Gandhi Equity Saving Scheme : All About RGESS For Retail Investors Announced In Budget 2012-13

Few tips for tax planning:

  • Plan Your future investments as the tax to be paid is designed accordingly .
  • Properly plan the tax with quality time investment.
  • Do not keep it pending for last minute plans and investments.
  • Tax Planning is to done again with the job shifting.

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