Last Updated: January 11, 2023, 13:16 IST
Salaried people who rent a home are eligible to claim an HRA tax exemption.
One of the widely known are the allowances under section 10 that salaried people receive from their employers and whose details are listed in Form 16.
Allowances are financial benefits that a salaried person receives from their employer. Allowances are broken down into many categories and can be claimed monthly by an employee. These allowances are helpful in saving while filing income tax returns (ITRs), which include data on the net tax due, tax deduction claims, and an overall picture of total taxable income.
There are three broad types of allowances: taxable, partially taxable, and non-taxable. One of the more known is the allowances under section 10 that salaried people receive from their employers. Details of these allowances are listed in Form 16, an official document containing information on tax deducted at source (TDS), exempted allowances under Section 10, and wage breakdown. It is a crucial document required for filing ITRs during their designated term.
House Rent Allowance (HRA):
Salaried people who rent a home are eligible to claim an HRA tax exemption. If you live in a metro area, you will receive a total of 50% of your pay (basic salary + Dearness Allowance), or 40% if you live in a non-metro area. Second, excess rent payments that exceed 10% of annual income (base salary plus DA)
Leave Travel assistance or concessions:
In accordance with this benefit, the employee’s travel expenses for a vacation in India are accepted as tax-free expenses. Employees may take time off from work to travel, and the company will reimburse them for their travel expenses as a tax-free perk. To claim LTA, train, plane, or public transportation should be used as the mode of transportation.
Children’s Education Allowance:
A maximum of two children are free from payment up to Rs. 100 per month per child.
Uniform Allowance:
The cost of maintaining or acquiring a uniform to be worn while performing office or employment-related responsibilities are exempt from the actual amount spent.
Books and Periodical Allowance:
In accordance with income tax law, expenses incurred for books, newspapers, periodicals, journals, etc. are reimbursed tax-free. The amount reimbursed is the lesser of the bill amount or the sum included in the compensation package.
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