09-07-2011, 09:15 PM
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can you please let me know which allowances are exempted from tax in our salary.
Please tell me this in detail so that it help us to calculate tax and minimize tax from our salaries.
Thanks in advance
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Mainly only medical allowance not exceeding 10% of basic salary is exempt [Clause 139 (b) of Part II of Second Schedule]. This is allowed only if free medical treatment or hospitalization or reimbursement is not provided for in the terms of employment.
To minimize tax , suppose if your pay is Rs.50,000
Break this as Rs.45,500 (Basic Salary)
&
Rs. 4,500 as medical allowance
Your annual salary income will become 45,500 x 12 =
However, if your employer is maintaining provident fund account and shows basic salary at lower level, he will not agree to this formula as provident fund contribution is made on the basis of basic salary.
This problem can also be resolved by changing percentage of employer contribution to provident fund.
One other allowance is exempt. That is exempt by virtue of Clause 39 of Part I of Sec Schedule. This allowance is regarding expense which is specially granted to meet expenses wholly and necessarily incurred in the performance of duties of an office. However, this exemption is not allowed on conveyance or entertainment allowance
Further from the language of Clause 39, it is clear that this allowance must be equivalent to amount necessarily and wholly incurred in performance of duties. There is No limits in terms of percentage of salary/ basic salary, are given for this allowance. However, proof of expenditure may be required.
can you please let me know which allowances are exempted from tax in our salary.
Please tell me this in detail so that it help us to calculate tax and minimize tax from our salaries.
Thanks in advance
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Mainly only medical allowance not exceeding 10% of basic salary is exempt [Clause 139 (b) of Part II of Second Schedule]. This is allowed only if free medical treatment or hospitalization or reimbursement is not provided for in the terms of employment.
To minimize tax , suppose if your pay is Rs.50,000
Break this as Rs.45,500 (Basic Salary)
&
Rs. 4,500 as medical allowance
Your annual salary income will become 45,500 x 12 =
However, if your employer is maintaining provident fund account and shows basic salary at lower level, he will not agree to this formula as provident fund contribution is made on the basis of basic salary.
This problem can also be resolved by changing percentage of employer contribution to provident fund.
One other allowance is exempt. That is exempt by virtue of Clause 39 of Part I of Sec Schedule. This allowance is regarding expense which is specially granted to meet expenses wholly and necessarily incurred in the performance of duties of an office. However, this exemption is not allowed on conveyance or entertainment allowance
Further from the language of Clause 39, it is clear that this allowance must be equivalent to amount necessarily and wholly incurred in performance of duties. There is No limits in terms of percentage of salary/ basic salary, are given for this allowance. However, proof of expenditure may be required.
