Category Archives: TDS

Tax Deduction at Source

Allowances and tax exemption under the head salary

N Allowance Type Tax Exemption
1 House Rent Allowance (HRA) Minimum of the following will be tax free allowance1.A)For Metro cities-(Delhi, Chennai, Mumbai, Calcutta):-50% of Salary (Basic + DA + Fixed % of Commission on Sale)

B)Other Than Metro-40% of Salary

2.House Rent Allowance (HRA) received by employee by the company

3.Actual rent paid over the 10 % of Salary i.e =Rent paid to Landlord Less 10% of Salary (Basic + DA+ Fixed % on Sale)

2 Allowance paid to meet the cost of travel on tour on transfer
Note: Including sum paid for transfer/packing/transportation of personal effect
Exempted from tax up to the extent the allowance utilized for the travel
3 Allowance granted to meet the travel cost for performance of duty Exempted from tax up to the extent the allowance utilized for the travel
4 Allowance granted for transfer: daily allowance incurred on account of absence from his normal place of duty
Note: Granted for period of tour or for journey
Exempted from tax up to the extent the allowance utilized for the purpose
5 Allowance granted to meet the expenditure on helper for performance of duties of office Exempted from tax up to the extent the allowance utilized for the purpose
6 Allowance granted for encouraging the academic/research/professional pursuits Exempted from tax up to the extent the allowance utilized for the purpose
7 Allowance granted to purchase of uniform or maintenance of uniform for wearing during the performance of duties of an officer Exempted from tax up to the extent the allowance utilized for the purpose
8 Allowance granted to employee of transport business entity to meet his personal expenses during running of such transport 70% of total expense maximum to 10,000
9 Children education allowance Rupees 100 per child per month upto two children
10 Children hostel allowance Rupees 300 per child per month upto two children
11 Allowance granted to employee to  meet expenditure for commuting from residence to place of duty 800 Per Month
12 Allowance granted to employee who is blind or orthopaedically handicapped with disability of lower extremities to meet expenditure for commuting from residence to place of duty 1,600 Per Month
13 Underground Allowance granted to employee working in uncongenial, unnatural climate in underground mines 800 Per Month
14 Allowance granted to member of armed forces for work in highly active field area 4,200 Per Month
15 Allowance to  High Court Judge under section 22A(2), 22C  or to Supreme court judge under section 23B Exempted from tax
16 Entertainment allowance to Government empoyeeNote: Entertainment allowance first included in the salary under the head of salary and then deduction is given as per detail given left. Least of the following is exempted from tax
a) Rs 5,000
b)20% of Basic Salary
c)The Actual amount of entertainment allowance


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Posted by on January 18, 2013 in Salary Components, TDS


Fringe benefits

1. Definition of fringe benefits

Employee benefits (also called fringe benefits) are various non-wage compensations provided to employees in addition to their normal wages or salaries.

2. Purpose of fringe benefits:

The purpose of employee benefits is to retain people in the organization and not to stimulate them to greater effort and higher performance.

3. Advantages of fringe benefits:

Advantages for employer

• Improves efficiency and productivity as employees are assured of security for themselves and their families.

• Premiums are tax deductible as corporation expense, which means savings with quality coverage.

• Helps attract and retain better qualified employees.

• Provides high risk coverage at low costs easing the company’s financial burden.

Advantages for employees

• Employees with personal life insurance enjoy additional protection.

• Confidence in company’s schemes boost staff morale and pride in company.

• Employees enjoy cheaper rates negotiated through their employer than they could obtain as an individual.

• Peace of mind leading to better productivity as employees are assured of provision for themselves and families in any mishap.

4. Types of fringe benefits:

• Premium Payments: This is the period of time a worker has worked, and payment is based on daily or weekly.

• Payment for time not worked: Which include payment for sick leave and for time during which an employee is under medical care. Payments for holiday, vacations, call back time, dressing time, portal-to-portal time and wet time.

• Payment for employee service: This include Cafeteria subsidies, union credit, house financing etc.

• Payment for special duties: Such as working on grievance redressal procedures and labour contract negotiations.

• Payments for health & Security benefits: These include retirement plans, social security payments, Saving plans, Profit sharing plans, Group Life Insurance etc.

• Other expenditure: Like holiday bonus, on educational reimbursements, employee uniforms, work cloths, supper money or meal allowance etc.



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Posted by on December 25, 2012 in FBT


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Books and Periodicals Reimbursement

Amount received against books and periodicals can be claimed on submission of bills.
Exemption will be as below:
1. Amount received towards reimbursement
2. Actual amount spent
which ever is less of 1. and 2


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Posted by on December 18, 2012 in TDS


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Tax Tips – Tell me…”Do I get any tax benefits from Leave Travel Allowance?”

As we approach the end of the financial year, many of us are busy arranging for travel bills to be submitted to our employer in order to claim Leave Travel Allowance (LTA) exemption and some of us are even planning a vacation. Let’s see how LTA exemption is calculated by employers.

Leave Travel Allowance is actually a rather simple tax-saving benefit that covers your holiday expenses.Leave Travel Allowance is granted to employees to meet cost of travel on leave to any place in India. For LTA it is essential that:

  • You’ve taken leave from the office
  • The travel is performed to any place in India

What’s covered?

The exemption is allowed only in respect of the fare. Expenses incurred towards boarding and lodging or on conveyance to and from the railway station/airport do not qualify for exemption.

Meaning :Only the travel costs, not the eating and partying or hotel bills.

So, whether you fly, hop on to a train or take public transport, you can show the ticket and claim your LTA.

What if you want to travel by a car? If a car is owned by a central government organisation like ITDC, the state government or the local body, LTA is permitted.

If you could not get public transport and resorted to private transport, try and get a bill. If the bill is not accepted by your employer, you can always file an income tax return, claim an exemption and get a refund.


How often can I claim this exemption?

You can claim LTA exemption twice in a block of four calendar years. The current block is 2006-09. Thus, during the period 2006-09 you can claim this exemption for any two years.

What if I am not able to claim exemption in a particular block?

Well, the good news is that if in a particular block you are not able to claim LTA exemption for both journeys or for one journey, then one journey can be carried forward and can be claimed in the first calendar year of the succeeding block. Thereafter, you can claim the remaining two journeys of that particular block. Lets understand this using an example.

Suppose Raj was not able to perform any travel in the current block, i.e., 2006-09. Now he can carry forward one journey to the succeeding block, i.e., 2010-13, and can claim it in the first calendar year, i.e., 2010. Thereafter, he can also claim the remaining two journeys of the block 2010-13. In a way, Raj will be able to avail three exemptions in the block 2010-13.

Who all can accompany me on this travel?

Any one you like to take along but travel exemption shall be available only in respect of following:

  • Your spouse and up to two children
  • Parents, brothers and sisters mainly dependent on you.

How is the exemption amount calculated? Is there any cap attached?

Travel concession received by employee shall be exempt to the extent amount spent on travel or the following specified limits, whichever is less:

Mode of Transport Maximum Exemption Limit
Air Economy Air fare on National carrier on shortest route.
Any mode other than Air
  1. Destination Connected by Rail:
    First AC Rail fare by shortest route.
  2. Destination not Connected by Rail:
    1. Where recognized public transport system exist.
      First class or deluxe class fare
    2. Where recognized public transport system does not exist.
      First AC rail fare for equivalent distance

If above table is too technical let’s try and understand with the help of following flow chart:

Is exemption allowed only for domestic travel, or can I claim international travel as well?

According to the LTA rules, international travel is not covered.

In the case where you take a travel package, your itinerary might be such it covers two Indian destinations among some international destinations as well. Here the claim can be submitted for the two Indian destinations en route. LTA shall be allowed according to the air fair charged by national carrier on the shortest route between the two Indian destinations.

For example, you might be offered the following routing for a trip to Bangkok: Delhi – Colombo – Bangkok – Colombo – Trivandrum – Delhi

The claim can be submitted for the Delhi – Trivandrum – Delhi sector, which shall be allowed to the extent of economy class air fair charged by national carrier by shortest route.

Do I need to submit travel bills to my employer to claim LTA?

In a recent judgment dated 21st January, 2009, the Supreme Court of India pronounced that the employers are under no statutory obligation to collect travel bills from the employees to allow LTA exemption. However, to be on the safer side most employers are still following traditional method of collecting travel bills to allow LTA exemption.

What if I failed to claim LTA and my employer had deducted tax on the LTA amount?

If you failed to claim LTA from your employer and your employer has deducted taxes on the amount paid, you can claim the same in your ITR and accordingly you shall get a refund of tax deducted.

Quick tips

i. You can get LTA only if you have applied for leave from your company and have actually travelled.

ii. If your family travels without you, no LTA can be claimed. You have to make the trip, either by yourself. If claiming for family, you should travel with them.

iii. You will need to keep your air, rail or public transport ticket. Or, if you rented a car, give the bill issued by the car rental company.

iv. International travel is not valid. It must be within the country.

v. Though you can claim two journeys in a block of four years, you can claim the LTA benefit just once in a year. You cannot claim both the journeys in one year. So, if you make two trips in a year, you lose one. A way out is to claim one and make your spouse claim the other.


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Posted by on December 18, 2012 in TDS


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Taxable items in salary

Every individual who earns an income in India is entitled to pay Tax on the Income earned by him during that financial year to the government of India. Calculation of the Income Tax to be paid by an individual is a cumbersome process. The government of India provides certain benefits to its citizens who earn an income in the country by means of deductions, exemptions etc.

The Heads of Income includes the types of income earned by an individual that would qualify as Income for which he/she needs to pay tax. These include the components that would be earned by an individual through employment with an organization/company. They are:

1. Salaries & Wages
2. Bonus & Commissions
3. Other Perquisite benefits

Deductions on Income:

As per the IT regulations, there are certain deductions that are allowed on the income earned by an individual. These amounts can be subtracted while arriving upon the net taxable salary of an individual. They include:

1. Housing Rent Allowance (HRA) – The HRA is usually a part of the salary/wages paid out to an employee by the employer. The deduction on HRA is eligible to any individual who is residing in a rented house and is paying rent to the house owner. There are some rules that govern the limit till which HRA can be deducted from your taxable income. Out of the below mentioned 3 items whichever is LEAST will be considered for the purpose of deduction under the HRA component.

a. Actual amount of the HRA paid by the employer (As part of Salary) Or

b. 50% of Basic salary in case of Metros (Delhi, Bombay, Calcutta & Chennai) or 40% of Basic salary in case of non Metros. Or

c. Actual rent paid by the individual – 10% of Basic salary

For e.g., your monthly Basic salary is Rs. 12,000/- and the HRA component as per your salary is Rs. 6000/- and the actual rent you are paying is Rs. 6000/- in Chennai then the amount you would be eligible for HRA exemption is Rs. 4800/- (Actual rent – 10% of Basic salary) per month.

2. Leave Travel Allowance (LTA) – LTA also is usually a part of the salary paid out to an employee as part of his employment. As per the Indian tax laws you are eligible to claim an amount that less than or equal to the total LTA paid out to him by his employer. This would cover the expenses incurred in travel of self with/without dependents. (Dependents would include spouse, children and dependent parents) There are some conditions which need to be satisfied for an individual to claim exemption under LTA. They are:

a. LTA can be claimed only twice in a block of 4 financial years. You cannot claim LTA every year.

b. Only Transportation expenses would be considered for LTA. Accommodation & food expenses are not considered.

c. For an employee to be eligible for claiming LTA, he/she should have taken at least 3 days of earned leave from the employer

3. Medical Allowance – Medical allowance is also a part of the salary paid out to an employee. The maximum amount eligible for this component is either Rs. 15,000/- or the actual amount paid out to you as part of Salary. To claim exemption under this you need to provide medical bills to substantiate your claim of having incurred medical expenditure. The medical bills can be in the name of the individual or his spouse or children or dependent parents.

4. Transportation Allowance – The IT laws permit a deduction of Rs. 9,800/- as a standard transportation allowance to all resident individuals who pay income Tax. This amount is standard irrespective of the job/industry the individual is employed. Also this amount does not change irrespective of the means of transport you use to commute to your office.

5. Interest Paid on housing loan – The IT laws permit an individual who has taken a home loan from a recognized bank for the purpose of construction or purchase of a residential property to claim exemption on tax on the interest part of the loan taken by the individual. There is a limit to this exemption which is as follows.

a. If the property is occupied by the individual then the maximum eligible amount under this is Rs. 1,00,000/-

b. If the property is rented out and the rental income is included in the total income earned by the individual then there is no maximum amount. The actual interest paid on the home loan can be used for deduction from total salary considered for the purpose of income tax.
Note: Exemption is available on home loans taken to purchase residential property only. Home loans taken to purchase land do not qualify for income tax exemption.

The Income Tax laws allow all individuals who are assessed for income tax to claim exemption from income tax under the following heads.

1. Section 80C – The section 80C of the IT laws provide exemption from income tax on amounts that are invested by the individual. This usually includes the amount the individual invests in certified instruments that are exempt from tax.


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Posted by on December 18, 2012 in TDS


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Rates of tax

Posted In Income Tax | Articles, Featured | 19 Comments »

Simple tax calculator for the use of salaried employees of govt and private sector, basis the latest budget changes.
Latest updates:
Increase of Basic exemption limit:
Major expectation of increase in basic exemption limit has been given in the budget; the limit has been increased from Rs.2 lakhs to Rs. 2.50 lakhs for individuals except senior citizens and for senior citizens between 60 to 80 years has been increased from Rs. 2.50 lakhs to Rs. 3 lakhs. The revised income tax slabs are given below the table
Rates for Individuals below 60 years
Income slabs Income tax rate
Income up to Rs. 2.50 lakhs Nil
Rs. 2.50 to Rs. 5 lakhs 10%
Rs.5 Lakhs to Rs. 10 Lakhs 20%
Rs. 10 lakhs above 30%
Rates for Individuals below 60 years below 80 Years
Income slabs Income tax rate
Income up to Rs. 3 lakhs Nil
Rs. 3 to Rs. 5 lakhs 10%
Rs.5 Lakhs to Rs. 10 Lakhs 20%
Rs. 10 lakhs above 30%
Rates for Individuals 80 years & above
Income slabs Income tax rate
Income up to Rs. 3 lakhs Nil
Rs. 3 to Rs. 5 lakhs Nil
Rs.5 Lakhs to Rs. 10 Lakhs 20%
Rs. 10 lakhs above 30%
Surcharge of 10% on Income tax those taxable income exceeds Rs. 10 crore will apply.
Education cess will apply 3% on the Income tax & Surcharge will apply for all.
Increase in limit under section 80C:
Section 80C gives deduction for various savings schemes till now Rs. 1 lakhs has been enhanced to Rs. 1.50 lakhs .
Increase in housing interest deduction:
Existing limit of Rs.1.50 lakhs for self occupied property interest deduction has been enhanced to Rs. 2 lakhs.


– See more at:



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Posted by on December 9, 2012 in TDS


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Section 80D – Deduction in respect of for health insurance premia paid, etc.

Section 80D provides for deduction available for health insurance premia paid, etc. which is calculated as under:

Sl. No.

Persons for whom payment made

Nature of payment

Mode of payment

Allowable Deduction (in Rs.)


Employee or his family

  ♦  the whole of the amount paid to effect or to keep in force an insurance on the health of the employee or his family or♦  any contribution made to the CGHS or♦  any payment on account of preventive health check-up of the employee or family, [restricted to Rs. 5000/-; cash payment allowed here]

any mode other than cash

Aggregate allowable is Rs. 15,000/{For Senior Citizens it is Rs. 20000/-}.


Parent or Parents of employee

  ♦  the whole of the amount paid to effect or keep in force an insurance on the health of the parent or parents of the employee or♦  any payment made on account of preventive health check-up of the parent or parents of the employee [restricted to Rs. 5000/-; cash payment allowed here]

any mode other than cash

Aggregate allowable is Rs. 15,000/ than {For Senior cash Citizens it is Rs. 20000/-}


(i) “family” means the spouse and dependent children of the employee.

(ii) Senior citizen” means an individual resident in India who is of the age of sixty years {For AY 2013-14 onwards] or more at any time during the relevant previous year.

The DDO must ensure that the medical insurance referred to above shall be in accordance with a scheme made in this behalf by-

(a) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalization) Act, 1972 (57 of 1972) and approved by the Central Government in this behalf; or

(b) any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999(41 of 1999).


Section 80D in Respect to Health Insurance Premiums

Investments made towards payment of health insurance premiums, qualify for a tax deduction under section 80D.

Available Deduction – For individuals less than 65 years of age, amount of health insurance premium paid or Rs. 15,000, whichever is lesser. For senior citizens above 65 years, amount of health insurance premium paid or Rs. 20,000, whichever is lesser.

A further deduction of Rs 15,000 could be claimed, for buying health insurance policy for your parents (Rs 20,000 if either of your parents is a senior citizen). This is irrespective of whether they’re dependent on you or not. No deductions can be claimed for in-laws.

Scope of Deduction – Individual assesses can claim deduction for premiums paid towards health insurance of self, spouse, parents and children.

For HUF assesses, premium paid for insuring the health of any member of the HUF, can be used for deduction.

Key Factors to keep in mind

  1. The premium may be paid by any mode of payment, other than cash.
  2. The health insurance premium that you pay must be from the taxable income applicable for the year you claim. Premiums should not be from gifts received by you.
  3. Part payment of premium is allowed. For example, suppose your parents contribute 50% of their health insurance premium and you pay the balance 50% of their premium. In such a case, you could avail the deduction for the amount contributed by you and your parents too could avail deduction for their contribution.



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Posted by on December 9, 2012 in TDS


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