March 30, 2011


I am posting some important details about the Tax Structure as of now in India.

Section 10 (13A) House Rent Allowance :

Deduction from taxable income is available for the least of the following is exempt:

(i) 40% of salary for the relevant period where the residence is situated in any place other than Delhi,Mumbai, Chennai & Kolkata (50% of salary in the case of Delhi, Mumbai, Chennai & Kolkata).
(ii) Actual house rent allowance received by the employee
(iii) The excess of rent paid over 10% salary for the relevant period

‘Salary’ for the purposes of computation of HRA exemption means basic salary and includes dearness allowance, if any. It also includes commission based on a fixed percentage of turnover, if the terms of employment so provide.

Exemption is not available to an assessee who lives in his own house or in a house for which he doesn’t pay rent.

Rent receipt for the period of employment during the year needs to be submitted showing the address of the accommodation (which should tally with the address currently with HR as your address of residence), with the name and address of landlord/landlady, stating the month/period for which the rent is received, together with the rent received by him/her from you. The said receipt needs to be signed by the landlord/landlady. For administrative reasons the Income Tax Department has decided that the employee need not produce rent receipts if house rent allowance is up to Rs 3,000/- per month, but the same may be requested by his assessing officer during regular assessment.

Conveyance Allowance :

Conveyance Allowance is exempted up to a maximum of Rs 800 per month. No bills need to be submitted for claiming the conveyance allowance.

Medical Reimbursement :

Reimbursement by the employer (against bills) of amounts spent by the employee in obtaining medical treatment for himself or any member of his family for obtaining medical treatment not exceeding in aggregate Rs 15,000 in a year (this would be Rs 1,250 per month) is fully exempt from tax. Tax exemption will be provided on the basis of bills submitted. Family means spouse and children of the employee, and includes parents, brothers and sisters of the individual if they are wholly and mainly dependent on the employee. Please therefore list out the medical bills being submitted with the grand total and against each entry mark out the name of the patient, his/her relationship to the employee eg self, wife, son, daughter etc, as also the name of the doctor recommending the medicine/treatment if the bills are of medicine, xray etc. Please note that cosmetics etc from the medical stores will be disallowed.

Section 10 (5) Leave Travel Allowance/Assistance (LTA):

Leave travel concession is available with respect to any assistance received by the employee from the employer in connection with his proceeding on leave to any place in India. As per the income tax rules,

LTA shall be exempt from tax in respect of two journeys performed in a block of 4 years. Current block is from January 1, 2006 to December 31, 2009.

The documents required to be submitted are:

(i) Covering sheet giving the employee name, persons travelled, and their relationship to the employee, together with the place of travel, and break up of the supporting being attached.
(ii) The HR department need to sign off on the above sheet stating the leave taken as also certifying if any of the said dates were official holidays
(iii) Tickets, Boarding passes (in case of travel by air), and trip sheet with fuel bills (in case of travel by road). In case of train tickets suggest photocopies are taken before travel just in case one has to hand over the original tickets to the railway checker.
(iv) The employee should note on the above sheet the LTA exemption claimed by him/her from previous employee during the said block of January 1, 2006 to December 31, 2009. If NIL, it should be so stated.

Exemption is limited to the amount actually spent in connection with leave travel, where the exemption will be calculated as follows:

(i) If the journey is performed by air: Air economy fare of the national carrier for the shortest route or the amount spent, whichever is less.

(ii) If by rail: Air-conditioned first class rail fare for the shortest route or amount spent, whichever is less.

(iii) Any other mode of transport for places of origin and destination connected by rail: Air-conditioned first class rail fare for the shortest route or amount spent, whichever is less.

(iv) The exemption is only available for travel ticket cost abd not for local conveyance, boarding and lodging expenses etc etc

(v) Journey within India is only allowed

The travel ticket deduction is available for employee, his/her spouse and children, and includes parents, brothers and sisters of the individual if they are wholly and mainly dependent on the employee.

The employee should accompany his dependent family members on the said trip.

Section 80 C deduction in case of certain payments/investments :

Deduction up to Rs 1,00,000 per year is allowed for payments made to:

(i) Public Provident Fund for self, spouse & children.
(ii) Contribution to Superannuation Fund.
(iii) Unit Linked Insurance Premium of UTI/LIC (continuous for a minimum period of 5 years) for self, spouse & children.
(iv) Life Insurance Premium (maximum premium 20% of sum assured) for self, spouse & children
(v) Non-commutable Deferred Annuity.
(vi) National Savings Certificates (NSC) VIII Issue for self, spouse & children
(vii) Contributions to notified pension funds set up by UTI or any notified mutual fund
(viii) Units of specified Mutual Funds or UTI (Equity Linked Saving Scheme)
(ix) Children Tuition expenses for a maximum 2 children (University, college or school fees for full time education other than donation/ development fees)
(x) Contribution to 10/ 15 years account under Post Office Savings Bank (Cumulative Time Deposits) Rules.
(xi) Deposits with Banks (for a period of 5 years and above)
(xii) Subscription to deposit schemes of housing authorities
(xiii) Payments for acquisition of a residential house

Supporting receipt of payment should be provided. Since banks/mutual funds etc are coming out with new schemes day after day it is not possible for us as employers to track the same, so please ensure that either the receipt specifically mention that it has Section 80 C exemption and/or provide to the Company copy of the scheme which states that Section 80 C exemption is available.

Section 80D - Medical Insurance Premium Paid :

This is allowed for payment on behalf of self, spouse, dependent parents and subject to a maximum deduction of Rs.15,000 in total a year

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