Income Tax benefit for salaried person

Salaried persons constitute a large portion of total taxpayers in India and their contribution to total tax collection. As there are various allowances and perquisites available to an employee, and so forth.

List of benefits available to Salaried Persons  

  1. House Rent Allowance, 
  2. Children Education Allowance, 
  3. Hostel Expenditure Allowance,
  4.  Transport Allowance and other allowances
  • Perquisites in respect of Rent free unfurnished accommodation provided to Central and State Government employees, Unfurnished rent-free accommodation provided to other employees, Rent free furnished accommodation, A furnished accommodation in a Hotel, Motor Car or Other Conveyance, Services of a domestic servant including sweeper, gardener, watchmen or personal attendant, Supply of gas, electricity or water for household purposes, Education Facilities, Transport facilities provided by the employer engaged in the carriage of passenger Amount payable by the employer to effect an insurance on the life of employee or to effect a contract for an annuity, ESOP/ Sweat Equity Shares, Employer’s contribution towards superannuation fund, Interest-free loan or Loan at concessional rate of interest and other perquisites.
  • Retirement Benefits taxability in respect of  National Pension System, Provident Fund, Voluntary Retirement, Pension, Gratuity, Retrenchment Compensation, Leave Encashment.
  • Arrear of Salary and relief section 89(1)
  • Other benefits

List of benefits available to Salaried Persons

S. N.SectionParticularsBenefits
A.Allowances
1.10(13A)House Rent Allowance lower of the following is exempt:a) Actual HRA Receivedb) 40% of Salary (50%, if house situated in metropolitan cities)c) Rent paid – 10% of salary* Salary= Basic + DA (if part of retirement benefit) + Turnover based Commission
2.10(14)Children Education AllowanceRs. 100 per month per child up to a maximum of 2 children is exempt
3.10(14)Hostel Expenditure AllowanceRs. 300 per month per child up to a maximum of 2 children is exempt
4.10(14)Transport AllowanceRs. 3,200 per month granted to an employee, who is blind or deaf and dumb or orthopedically handicapped with disability of lower extremities
5.10(14)Transport Allowance to an employee working in any transport businessAmount of exemption shall be lower of following:a) 70% of such allowance; orb) Rs. 10,000 per month.
6.10(14)Conveyance Allowance Exempt to the extent of expenditure incurred
7.10(14)Allowance granted to meet the cost of travel on tour or on transferExempt to the extent of expenditure incurred
8.10(14)Daily Allowance Exempt to the extent of expenditure incurred
9.10(14)Helper/Assistant AllowanceExempt to the extent of expenditure incurred
10.10(14)Research Allowance granted for encouraging the academic research and other professional searchExempt to the extent of expenditure incurred
11.10(14)Uniform AllowanceExempt to the extent of expenditure incurred
12.10(7)Foreign allowances /perquisites paid / allowed by Government  Fully Exempt
13.Allowances to Judges of High Court or Supreme Court Fully Exempt.
14.10(45)Following allowances and perquisites given to serving Chairman or  Member of UPSC is exempt from tax:a) Value of rent free official residenceb) Value of conveyance facilities including transport allowancec) Sumptuary allowanced) Leave travel concessionFully Exempt
15.Allowances paid by the UNO to its employeesFully Exempt
16.10(45)Allowances to Retired Chairman or Members of UPSC Exempt subject to maximum of Rs.14,000 per month The value of residential telephone free of cost and the number of free calls to the extent of 1500 per month shall be exempt.
17.10(14)Special compensatory Allowance Amount exempt from tax varies from Rs. 300 per month to Rs. 7,000 per month.
18.10(14)Border area allowances, Remote Locality allowance/Disturbed Area allowance/Difficult Area Allowance Amount exempt from tax varies from Rs. 200 per month to Rs. 1,300 per month.
19.10(14)Tribal area allowance given in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) OrissaRs. 200 per month
20.10(14)Compensatory Field Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance Rs. 2,600 per month
21.10(14)Compensatory Modified Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowanceRs. 1,000 per month
22.10(14)Counter Insurgency Allowance granted to members of Armed Forces operating in areas away from their permanent locations. If this exemption is taken, employee cannot claim any exemption in respect of border area allowanceRs. 3,900 per month
23.10(14)Underground Allowance is granted to employees working in uncongenial, in underground minesUp to Rs. 800 per month
24.10(14)High Altitude Allowance is to armed forces operating in high altitude areas a) Up to Rs. 1,060 per month (for altitude of 9,000 to 15,000 feet)b) Up to Rs. 1,600 per month (for altitude above 15,000 feet)
25.10(14)Highly active field area allowance granted to members of armed forceUp to Rs. 4,200 per month
26.10(14)Island Duty Allowance granted to members of armed forces in Andaman and Nicobar and Lakshadweep group of Island Up to Rs. 3,250 per month
B.Perquisites
1.17(2)(i)/(ii) Rent free unfurnished accommodation provided to Central and State Government employeesLicense Fees determined in accordance with rules framed by Government for allocation of houses shall be deemed to be the taxable value of perquisites.
2.17(2)(i)/(ii) Unfurnished rent free accommodation provided to other employeesTaxable value of perquisitesA. If House Property is owned by the employer:i. 15% of salary, if population of city where accommodation is provided exceeds 25 lakhs ii. 10% of salary, if population of city where accommodation is provided exceeds 10 lakhs but does not exceed 25 lakhs iii. 7.5% of salary, if accommodation is provided in any other city
B. If House Property is taken on lease or rent by the employer, the perquisite value shall be :i.)Rent paid or by the employer or 15% of the salary, whichever is lower*Salary includes:a) Basic Payb) Dearness Allowance c) Bonusd) Commissione) All other allowances f) Any monetary payment which is chargeable to taxBut does not include-i. Value of any perquisite [under section 17(2)]ii. Employer’s contribution to PFiii. Benefits received at the time of retirement like gratuity, pension etc.
3.17(2)(i)/(ii) Rent free furnished accommodationTaxable value of perquisitesa)Taxable value of perquisite assuming accommodation to be provided to the employee is unfurnishedb) Add: 10% of original cost of furniture and fixtures or actual higher charges paid or payable 
4.17(2)(i)/(ii) furnished accommodation in a HotelTaxable value of perquisitesValue of perquisite shall be lower of following:a) Actual charges paid by the employer to such hotelb) 24% of salary
5.17(2)(iv)Any sum paid by employer in respect of any obligation of an employeeFully Taxable
5A.17(2)(vii)Contribution made to the account of the assessee by the employer––(a) in a recognised provident fund;(b) in the scheme referred to in section 80CCD(1); and(c) in an approved superannuation fundTo the amount it exceeds Rs. 7,50,000
5B.17(2)(iv)Any annual accumulation by way of interest, dividend or any other amount of similar nature during the previous year to the balance at the credit of the fund or schemeTo the extent it relates to the employer’s contribution which is included in total income
6.17(2)(viii) Services of a domestic servant including sweeper, gardener, watchmen or personal attendantTaxable value of perquisite shall be salary paid or payable by the employer for such services less any amount recovered from the employee.
7.17(2)(viii) Supply of gas, electricity or water for household useTaxable value of perquisites:1. Manufacturing cost per unit incurred by the employer., if provided from resources owned by the employer;2. Amount paid by the employer, if purchased by the employer from outside agency
9.17(2)(viii) Transport facilities provided by the employer engaged in carriage of passenger or goods (except Airlines or Railways)Value at which services are offered by the employer to the public minus amount recovered from the employee shall be a taxable perquisite
10.17(2)(v)Amount payable by the employer to effect an insurance on life of employee or to cause a bond for an annuityFully Taxable
11.17(2)(vi) 
ESOP/ Sweat Equity SharesTaxable value of perquisitesFair Market value of shares or securities on the date of exercise of option by the assessee minus amount recovered from the employee in respect of such shares shall be the taxable value of perquisites.Fair Market Value shall be determined as follows:a) In case of listed Shares: Average of opening and closing price as on date of exercise of option b) In case of unlisted shares/ security other than equity shares: Value determined by a Merchant Banker as on date of exercise of option 
12.17(2)(vii)Employer’s contribution towards superannuation fundTaxable in the hands of employee to the amount such contribution exceed Rs.1,50,000
13.17(2)(viii) Interest free loan or Loan at concessional rate of interestInterest free loan or loan at concessional rate of interest given by an employer to the employee is a perquisite chargeable to tax in the hands of all employees on following basis:1. maximum outstanding monthly balance2. Rate of interest charged by the SBI as on the first day of relevant previous year in respect of loan for the same purpose advanced by it;3. Calculate interest for each month of the previous year on the outstanding amount4. Interest actually recovered, if any, from employee5. The balance amount 
14.17(2)(viii) Facility of travelling, and accommodation availed of by the employee or any member of his household for any holidaya) Perquisite value taxable in the hands of the employee shall be expenditure incurred by the employer minus the amount recovered from the employee.b) Where such a facility is maintained by the employer, and is not available uniformly to all employees, the value of benefit shall be taken to be the value at which such facilities are offered by other agencies to the public minus the amount recovered from the employee.
15.17(2)(viii) Free food and beverages provided to the employee1) Fully Taxable: Free meals in excess of Rs. 50 per meal less amount paid by the employee shall be a taxable perquisite2) Exempt from tax: Following free meals shall be exempt from taxa) Food and non-alcoholic beverages provided during working hours in remote area or in an offshore installation;b) Tea, Coffee or Non-Alcoholic beverages and Snacks during working hours are tax free perquisites;
16.17(2)(viii) Gift or Voucher or Coupon on ceremonial occasions a) Gifts in cash or convertible into money b) Gift in kind up to Rs.5,000 in aggregate per annum would be exempt, 
17.17(2)(viii) Credit Carda) Expenditure incurred by the employer in respect of credit card used by the employee or any member of his household minus amount recovered from the employee is a taxable perquisiteb) Expenses incurred for official purposes shall not be a taxable perquisite provided complete details in respect of such expenditure are maintained by the employer
18.17(2)(viii) Free Recreation/ Club Facilitiesa) Expenditure incurred by the employer towards annual or periodical fee etc. less amount recovered from the employee is a taxable perquisiteb) Expenses incurred on club facilities for the official purposes are exempt from tax.c) Use of health clubs, sports and similar facilities provided uniformly to all employees shall be exempt from tax.
19.17(2)(viii) Use of movable assets of the employer by the employee is a taxable perquisiteTaxable value of perquisitesa) Use of Laptops and Computers: Nilb) Movable asset other than Laptops, computers and Motor Car*: 10% of original cost of the asset (if asset is owned by the employer) or actual higher charges incurred by the employer (if asset is taken on rent) less amount recovered from employee.
20.17(2)(viii) Transfer of movable assets by an employer to its employeeTaxable value of perquisitesa) Computers, Laptop and Electronics items: Actual cost of asset less depreciation at 50% (using reducing balance method) for each completed year of usage by employer less amount recovered from the employeeb) Motor Car: Actual cost of asset less depreciation at 20% (using reducing balance method) for each completed year of usage by employer less amount recovered from the employeec) Other movable assets: Actual cost of asset less depreciation at 10% (on SLM basis) for each completed year of usage by the employer. Less amount recovered from the employee.
21.17(2)(viii) Any other benefit or amenity extended by employer to employeeTaxable value of perquisite shall be computed on the basis of cost to the employer (under an arm’s length transaction) less amount recovered from the employee.However expenses on telephones including a mobile phone incurred by the employer on behalf of an employee shall not be treated as taxable perquisite.
22.10(10CC)Tax paid by the employer on perquisites (not provided for by way of monetary payments) given to employeeFully exempt
23.10(5)Leave Travel Concession or Assistance (LTC/LTA), extended by an employer to an employee for going anywhere in India along with his family**Family includes spouse, children and dependent brother/sister/parents. However, a family doesn’t include more than 2 children of an Individual born on or after 01-10-1998.The exemption shall be limited to fare for going anywhere in India along with family twice in a block of four years:i. Exemption limit where journey is performed by Air – Air fare of economy class in the National Carrier by the shortest route or the amount spent, whichever is lessii. Exemption limit where journey is performed by Rail – Air-conditioned first class rail fare by the shortest route or the amount spent, whichever is lessiii. Exemption limit if places of origin of journey and destination are connected by rail but the journey is performed by any other mode of transport – Air-conditioned first class rail fare by the shortest route or the amount spent, whichever is lessiv. Exemption limit where the places of origin of journey and destination are not connected by rail:a. Where a recognized public transport system exists – First Class or deluxe class fare by the shortest route or the amount spent, whichever is lessb. Where no recognized public transport system exists – Air conditioned first class rail fare by shortest route or the amount spent, whichever is lessNotes:i. Two journeys in a block of 4 calendar years is exemptii. Taxable only in case of Specified Employees [See note 4]
24.Proviso to section 17(2)Medical facilities in India1) Expense incurred or reimbursed by the employer for the medical treatment of the employee or his family (spouse and children, dependent – parents, brothers and sisters) in any of the following hospital is not chargeable to tax in the hands of the employee:a)  Hospital maintained by the employer.b)  Hospital maintained by the Government or Local Authority or any other hospital approved by Central Governmentc)  Hospital approved by the Chief Commissioner having regard to the prescribed guidelines for treatment of the prescribed diseases.2) Medical insurance premium paid or reimbursed by the employer is not chargeable to tax.
25.17(2)Medical facilities outside IndiaAny expenditure incurred or reimbursed by the employer for medical treatment of the employee or his family member outside India is exempt to the extent of following (subject to certain condition):a) Expenses on medical treatment – exempt to the extent permitted by RBI.b) Expenses on stay abroad for a patient and one attendant – exempt to the extent permitted by RBI.c) Cost on travel of the employee or any family or one attendant – exempt, if Gross Total Income (before including the travel expenditure) of the employee, does not exceed Rs. 2,00,000.
C.Deduction from salary
1.16(ia)Standard DeductionRs. 50,000 or the amount of salary, whichever is lower
2.16 (ii)Entertainment Allowance received by the Government employees Lower of the following is deductible :a) Rs 5,000b) 1/5th of salary c) Actual entertainment allowance received
3.16(iii)Employment Tax/Professional Tax.Amount actually paid during the year is deductible. However, if professional tax is paid by the employer on behalf of its employee then it is first included in the salary of the employee as a perquisite and then the same amount is allowed as deduction.
D.Retirement Benefits
a) Leave Encashment
1.10(10AA)Encashment of unutilized earned leave at the time of retirement of Government employeesFully Exempt
2.10(10AA)Encashment of unutilized earned leave at the time of retirement of other employees Lower of the following shall be exempt from tax:a) Amount actually receivedb) Unutilized earned leave* X Average monthly salaryc) 10 months Average Salary**d) Rs. 3,00,000*While computing unutilized earned leave, earned leave entitlements cannot exceed 30 days for each year of service rendered to the current employer**Average salary = Average Salary*** of last 10 months immediately preceding the retirement***Salary = Basic Pay + Dearness Allowance (to the extent it forms part of retirement benefits)+ turnover based commission
b) Retrenchment Compensation
1.10(10B)Retrenchment Compensation received by a workman under the Industrial Dispute Act, 1947Lower of the following shall be exempt from tax:a) an amount calculated as per section 25F(b) of the Industrial Disputes Act, 1947;b) Rs. 5,00,000; orc) Amount actually receivedNote:i. Relief under Section 89(1) is availableii. 15 days average pay for each completed year of continuous service or any part thereof in excess of 6 months is to be adopted under section 25F(b) of the Industrial Disputes Act, 1947.
c) Gratuity
1.10(10)(i)Gratuity received by Government Employees Fully Exempt
2.10(10)(ii)Death -cum-Retirement Gratuity received by other employees who are covered under Gratuity Act, 1972 Lower of following amount is exempt from tax:1. (*15/26) X Last drawn salary** X completed a year of service or part thereof in excess of 6 months.2. Rs. 20,00,0003. Gratuity actually received.*7 days in case of seasonal establishment.** Salary = Last drawn salary including DA but excluding any bonus, commission, HRA, overtime and any other allowance, benefits or perquisite
3.10(10)(iii)Death -cum-Retirement Gratuity received by other employees who are not covered under Gratuity Act, 1972Lower of following amount is exempt from tax:1. Half month’s Average Salary* X Completed years of service2. Rs. 20,00,0003. Gratuity actually received.*Average salary = Average Salary of last 10 months immediately preceding the month of retirement** Salary = Basic Pay + Dearness Allowance (to the extent it forms part of retirement benefits)+ turnover based commission
d) Pension
1.Pension received from United Nation Organization by the employee of his family membersFully Exempt
2.10(10A)(i)Commuted Pension received by an employee Central Government, State Government, Local Authority Employees and Statutory CorporationFully Exempt
3.10(10A)(ii)Commuted Pension received by other employees who also receive gratuity1/3 of full value of commuted pension will be exempt from tax
4.10(10A)(iii)Commuted Pension received by other employees who do not receive any gratuity1/2 of full value of commuted pension will be exempt from tax
5.10(19)Family Pension received by the family members of Armed ForcesFully Exempt
6.57(iia)Family pension received by family members in any other case33.33% of Family Pension subject to maximum of Rs. 15,000 shall be exempt from tax
e) Voluntary Retirement
1.10(10C)Amount received on Voluntary Retirement or Voluntary Separation Lower of the following is exempt from tax:1) Actual amount received as per the guidelines Lower of the followinga) 3 months salary for each completed year of servicesb) Salary at the time of retirement 2) Rs. 5,00,000
f) Provident Fund
1.Employee’s Provident FundFor taxability of contribution made to various employee’s provident fund and interest arising thereon 
g) National Pension System (NPS)
1.10(12A) or 10(12B)National Pension SystemAny payment from the National Pension System Trust to an assessee on closure of his account or on his opting out of the pension scheme referred to in section 80CCD, to the extent it does not exceed 60% of the total amount payable to him at the time of such closure or his opting out of the scheme.
E.Arrear of Salary and relief under section 89(1)
1.15Arrear of salary and advance salaryTaxable in the year of receipt. However relief under section 89 is available
2.89Relief under Section 89If an individual receives any portion of his salary in arrears or in advance or receives profits in lieu of salary, he can claim relief as per section 89
F.Other Benefits
1.Lump-sum payment made gratuitously or by way of compensation or otherwise to widow Fully Exempt 
2.Ex-gratia payment to a person  by Central or State Government, Local Authority or Public Sector Undertaking subsequent upon injury to the person or death of family member while on duty Fully Exempt
3.Salary received from United Nation Organization Fully Exempt
4.10(6)(ii)Salary received by foreign national as an officials of an embassy, high commission, legation, consulate or trade representation of a foreign stateFully Exempt 
5.10(6)(vi)Remuneration received by non-resident foreign citizen as an employee of a foreign enterprise for services rendered in India, if:a) Foreign enterprise is not engaged in any trade or business in Indiab) His stay in India does not exceed in aggregate a period of 90 days in such previous yearc) Such remuneration is not liable to deducted from the income of employer chargeable under this ActFully exempt
6.10(6)(viii)Salary received by a non-resident foreign national for services rendered in connection with his employment on a foreign ship if his total stay in India does not exceed 90 days in the previous year.Fully exempt

Address
304 North Cardinal St.
Dorchester Center, MA 02124

Work Hours
Monday to Friday: 7AM - 7PM
Weekend: 10AM - 5PM