Rent-free Accommodation Introduction When an employer provides residential accommodation rent-free or at a concessional rate, the value of such a benefit is taxable as a perquisite under “Salaries.” This applies regardless of whether the accommodation is employer-owned or leased. Key Provisions Definition Accommodation includes houses, flats, hotels, guest houses, caravans, mobile home, ship or other… Read More »
Perquisites Introduction Perquisites refer to benefits or facilities provided by an employer to an employee in addition to salary. These benefits are taxable under the head “Salaries” when provided during employment. Definition and Examples Perquisites are emoluments for the personal benefit or use of the employee, in cash or kind, or money’s worth. Example: A… Read More »
Deductions from Salary The Income-tax Act allows three deductions under Section 16 for salary income: Standard Deduction Deduction for Entertainment Allowance Deduction for Professional Tax Standard Deduction [Section 16(ia)] Available to all employees, including retirees receiving pension. Deduction amount: 50,000 (for the regular tax regime). 75,000 (for the new tax regime under Section 115BAC. No documentation required to… Read More »
Taxability of Personal Allowances Introduction Allowances provided to employees for personal expenses are generally taxable under the head “Salary.” However, specific allowances are exempt up to predefined limits under the Income-tax Act. Exempt Personal Allowances Transport Allowance for Transport Employees Exempt for employees in transport systems for duty-related personal expenses. Exemption: Lower of 70% of… Read More »
Taxability of Official Duty Allowance Introduction Allowances provided to employees for expenses incurred wholly and exclusively in the performance of official duties are exempt from tax to the extent of the actual amount spent. Unutilized amounts are taxable under “Salaries.” Key Allowances and Tax Treatment Travelling Allowance Exempt to the extent of expenses incurred for… Read More »
Areas Eligible for Exemptions for Armed Forces Allowances Introduction Armed forces personnel receive various allowances to compensate for challenging conditions and high costs of living in specific areas. Exemptions for these allowances are defined under Rule 2BB and Section 10(14) of the Income-tax Act. Key Allowances and Exemption Limits High Altitude Allowance Areas above 9,000 feet: Exempt up to… Read More »
Taxability of Armed Force Allowance Introduction Armed forces personnel receive various allowances for serving in challenging and risky conditions. These allowances are partially or fully exempt from tax under the Income-tax Act, subject to prescribed limits. Eligible Armed Forces Members of the following forces qualify: Indian Army, Navy, Air Force, Coast Guard Central Reserve Police… Read More »
Taxability of House Rent Allowance (HRA) Introduction HRA is provided by the employer to employees to meet the cost of rented accommodation. Exemption is allowed under the Income-tax Act if the employee pays rent for a house not owned by them. Conditions for Exemption Employee must occupy rented accommodation and pay rent. No exemption is… Read More »
Taxability of Allowances Introduction Allowances are salary components paid to employees to meet specific expenses. Allowances are generally taxable unless explicitly exempted by the Income-tax Act. Key Types of Allowances Dearness Allowance (DA) Paid to offset inflation and rising living costs. Fully taxable. Included in salary for calculating exemptions (e.g., HRA, retirement compensation). City Compensatory… Read More »
Voluntary Retirement Compensation (VRS) Introduction Voluntary Retirement Compensation, provided under approved schemes, is exempt from tax up to Rs. 5,00,000 if certain conditions are satisfied. It is a one-time benefit taxable as profits in lieu of salary. Exemption for VRS Compensation Quantum of Exemption: Lower of: Compensation received; or 5,00,000. One-Time Benefit: The exemption cannot… Read More »