If you work in a private company then this news can be important for you. This is because employees can claim tax exemption on LTA, HRA, Provident Fund and Gratuity contributions, entertainment allowances, telephone bills, vehicles, books and magazines. In this financial year i.e. the year 2022, changes have been made regarding the tax of many allowances.
The same rules apply to all companies. Let us know what are the rules of income tax on gratuity, provident fund, house rent allowance (HRA), LTA and reimbursement and how much can be exempted.
tax on HRA
HRA is an important part of CTC, which is given as assistance to the employees living in rented accommodation. HRA is taxable if the employee is not living on rent.
50% of the salary and in other cases up to 40% of the salary or 10% of the salary if residing in metro cities (i.e. Mumbai, Delhi, Chennai and Kolkata), depending on the amount to be paid under section 10(13A). Tax exemption can be claimed under rent paid in excess.
Income Tax Exemption on Reimbursement
Companies offer many allowances for vehicles, books and magazines, entertainment, telephone and internet etc. Under this, under section 10(14) of the Income Tax Act, allowances provided to employees can come under tax free, if used.
Reimbursement of telephone/mobile and internet, to the extent of expenditure incurred in conveyance allowance, is also exempt under Rule 3(7)(ix) of the Income Tax Act. At the same time, tax exemption can be claimed for books and magazines under section 10(14). Whereas tax is applicable under entertainment allowance, but tax exemption can be taken if the company is used for business purposes. However, you must have a bill to make a claim.
Income Tax Rules under Provident Fund
Contribution to Provident Fund is eligible for deduction under Section 80C of the Income Tax Act. Under this, exemption amount up to 1.5 lakh can be claimed.
Income Tax Rule on Gratuity
Gratuity received during employment is fully taxable. On retirement, gratuity can be taxed if the employer is eligible under the Payment of Gratuity Act.
Under Section 10(10) of the Income Tax Act, the employee’s actual amount received, Rs 20 lakh, basic pay of salary + dearness allowance, six months of service or 15 days’ salary for each completed year of service, can be tax exempt. . On the other hand, if the employer is not covered under the Payment of Gratuity Act, then less exemption is given.
Income Tax Rules on LTA
Exemption is available for claiming tax exemption on Leave Travel Allowance by the actual traveling taxpayer, only on domestic journeys and for the individual employee or his family including the employee’s spouse, children, dependent parents, brothers and sisters.