Here is a list of 11 components in your salary that is tax-free. In case you have it in your pay slip, great – but in case you don’t have it – you can always discuss with your company and HR.
Download Automated Income Tax Form 16 Part B with Form 12 BA for Financial Year 2016-17 & Assessment Year 2017-18. [This Excel Based Software can prepare at a time 50 employees Form 16 Part B with Form 12 BA for F.Y.2016-17]
1. House Rent Allowance (HRA):
The HRA that can be claimed for tax exemption is minimum of
§ Actual HRA Received or
§ 40% (50% for metros) of (Basic + Dearness Allowance) or
§ Rent paid (-) 10% of (Basic + Dearness Allowance)
If you pay rent of more than Rs 1 Lakh, you need to give PAN Card number of the landlord to your employer. In case your landlord does not have a PAN Card, you will need to get a declaration signed by him for the same.
Tip: HRA at 50% of (Basic + Dearness Allowance) is the most optimum break up in a salary.
Download Automatic House Rent Exemption Calculator
2. Medical Reimbursement:
You can claim up to Rs 15,000 per year against medical expenses by submitting medical bills. The Even cost for eye testing and spectacles frame and lens costs are covered.
3. Transport Allowance:
Transport Allowance up to Rs 800 per month is tax-free while this limit is Rs 1,600 per month for an orthopedic person. Even if your employer pays more than 800 per month, you can only claim tax exemption up to Rs 800.
6. Leave Travel Allowance (LTA):
LTA is tax-free only when you get your traveling expenses reimbursed from the company on submission of the bills. You can claim LTA twice for two domestic trips with family in the block of four years. The present block is 2014 – 2017. There is no maximum limit of LTA and is decided by the employer.
The meaning of ‘family’ for the purposes of exemption includes spouse and children and parents, brothers and sisters who are wholly or mainly dependent on you. Only expenses incurred in traveling is covered. You cannot claim hotel stay and food bills.
Assuming Rs 1,500 per ticket for one-way train journey in 3AC, it costs Rs 12,000 for the return journey for the family of four. For journey by flight, this expense can easily go to Rs 30,000 per trip. Since this can be claimed once in two years LTA of at least Rs 12,000 per year seems sensible.
8. Uniform Allowance:
Amount up to Rs 24,000 per annum is tax-free, but this cannot be given for normal clothes. This is more common in manufacturing units where they have the dress code; it would be difficult to implement the same in IT/ITES sector.
9. Children Education Allowance:
Rs.100 per month per Child and Rs.300 for Hostel Expenditure for the maximum of two children is tax exempted.
