Income Tax Exemptions Applicable to Salaried Individuals in FY 2023-24
Salaried individuals often seek ways to optimize their income and minimize tax liabilities. Understanding the array of income tax exemptions and deductions available is crucial for achieving this financial objective. In this article, we explore key exemptions under Section 10 of the Income Tax Act for salaried employees in the financial year 2023-24.
House Rent Allowance (HRA)
Exemption Criteria: Least of the following
i. Actual HRA Received
ii. 40% of Salary (50% in Mumbai, Calcutta, Delhi, or Madras)
iii. Rent paid minus 10% of salary
Note:
i. Fully taxable if the employee resides in their own house or doesn’t pay rent.
ii. Mandatory PAN reporting for rent exceeding Rs. 1,00,000 [Circular No. 08 /2013 dated 10th October, 2013].
Children Education Allowance
Exemption: Rs. 100 per child for up to two children. Additional Rs. 300 for boarding school expenses (Hostel Expenditure Allowance). Covered under Section 10(14) of the Income Tax Act.
Conveyance Allowance
Exempt to the extent of actual expenditure incurred for official duty-related conveyance expenses.
Daily Allowance
Exemption under Section 10(14) for ordinary daily charges during absence from the normal place of duty. Exemption is limited up to the actual expenditure incurred.
Uniform Allowance
Exemption as per Section 10(14)(ii) for expenses on maintaining official uniforms. Considered a special allowance. Exemption allowed to the extent of actual expenditure.
Special Compensatory Allowance (Hilly Areas)
Exemption varies from Rs. 300 to Rs. 7,000 per month for residents in hilly areas, subject to certain conditions.
Border Area Allowances
Exemption for residents of border/remote/disturbed/difficult areas ranging from Rs. 200 to Rs. 1,300 per month under Section 10(14), subject to certain conditions.
Tribal Area Allowance
Exemption fixed at Rs. 200 per month for specified tribal areas in Madhya Pradesh, Tamil Nadu, Uttar Pradesh, Karnataka, Tripura, Assam, West Bengal, Bihar, Odisha.
Compensatory Field Area Allowance
Exempted under Section 10(14) at Rs. 2600 per month, subject to certain conditions and locations. No simultaneous claim with border area allowance can be claimed.
Compensatory Modified Area Allowance
Exemption fixed at Rs. 1000 per month under Section 10(14). No simultaneous claim with border area allowance can be claimed, subject to specific conditions.
Conclusion
Understanding and leveraging these income tax exemptions can significantly reduce the tax burden for salaried individuals. However, it’s essential to comply with reporting requirements and conditions stipulated by tax authorities to ensure a smooth and legal tax-saving strategy.
To Access the CBDT Notification No. 16/2024 CLICK HERE
To Know More About I-T Exemptions & Deductions CLICK HERE
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