Income Tax Exemptions refer to those incomes of a person which are not taxable at the time of calculating income tax. In India, Chapter III of the Income Tax Act, 1961 gives the provision for exemptions in Income Tax. All receipts which give rise to income are taxable unless they are specifically exempted from tax under the Act. Such exempted income are mentioned in different section of the Act. Some important exemption are list as below.
Exemptions under section 10 & 17
LTA exemption (Sec 10(5))
LTA is exempt to the tune of ecomony class airfare for the family to any destination in India, by the shortest route.
LTA can be claimed twice in a block of 4 calendar years. The current block is from Jan 2010 to Dec 2013
Other exemptions under Sec 10 (10) (gratuity, etc.)
Gratuity, VRS and some such amounts are exempt upto certain limits.
HRA Exemption (Sec 10 (13A))
If you do not get HRA, but have rented a house, an exemption is available. Read Important Deduction
Salaried people who pay rent and get a House Rent Allowance (HRA) can claim exemption.
This will be calculated as minimum of
– 40% (50% for metros) of Basic+DA or
– Actual HRA or
– Rent paid – 10% of Basic+DA
Here, salary includes basic salary, dearness allowance, and commission on fixed percentage, but not other allowances
Uniform expenses (Sec 10(14))
Uniform allowance is exempt to the extent of bills produced for purchase of uniforms
Children’s Education Allowance Exemption (sec 10 (14))
(max of 2 children only)
Children’s Education allowance is exempt upto Rs.100/- per child per month
Hostel expenses Rs.300/- per child per month
Transport Exemption (Sec 10(14))
Transport allowance is exempt upto Rs.800/- per month provided the person is in India during the month.
For people having permanent physical disability, the exemption is Rs.1,600/- per month
Medical Bills Exemption (Sec 17(2))
Medical bills are exempt for self and dependent family, upto Rs.15,000/- per annum