Income Tax Planning: Benefits of the Tax Deduction on these 7 Allowances. Taxpayers Check Immediately.

Income Tax Planning: Benefits of the Tax Deduction on these 7 Allowances. Taxpayers Check Immediately.

Along with investment documentation, salaried persons who file income taxes are eligible for tax deductions on company-provided benefits. Allowances are a type of financial reward the employed employee gets from his employer. The unique feature is that they also contribute to reducing tax obligations. The employee is eligible to claim the various categories of allowances each month. These allowances are helpful when submitting an income tax return (ITR).

 

Taxpayers are required to file ITR each year. Therefore as of 2023, it is crucial to understand the numerous allowances and related tax benefits that will be useful when completing ITR and further help reduce income tax due.

Benefits of Tax Deduction are available on these 7 Allowances-

 

The employees' allowances are fully taxable, partially taxable, and non-taxable. The most common benefits are those covered by Section 10 and whose specifics are listed in Form 16 that salaried persons get from their employers. The information on tax deducted at source (TDS), allowances exempt under section 10, and salary breakdown is contained in Form 16. Taxpayers must submit their ITR by July 31 of the current year 2022–23 (Assessment Year 2023–24).

 

House Rent Allowance (Sec. 10(13A)): 

House Rent Allowance is the compensation earned for making rent payments. HRA ranges from 40 to 50% of the base pay, and salaried people who live in leased housing can claim a tax exemption on HRA.

 

Leave Travel Concession or Assistance (LTC/LTA) (10(5)):

Travel costs incurred by the employee while on leave in India are permitted under this provision as a tax-free expense. Therefore, the company can give the employee a tax-free allowance for the money paid toward rent. Travel should be made by train, plane, or other public transportation.

 

Children's Education Allowance: 

Under this, a maximum of two children may be born each month. In addition, there is up to Rs 100 per month per child tax exemption.

 

Uniform Allowance: 

The actual amount spent does not apply to expenses made for purchasing or maintaining uniforms worn while performing responsibilities for an employer or office.

 

Books and Periodical Allowance: 

According to income tax rules, expenses incurred for books, newspapers, journals, magazines, etc., are reimbursed tax-free.

 

Relocation Allowance:

Employers ask employees to relocate to a different city for business purposes. The company pays tax-free reimbursements for train and airline tickets and car transportation costs, registration fees, packaging fees, and lodging for the first 15 days.

 

Helper Allowance:

 

When your employer permits you to choose a helper to do the official business of the office, you will receive a helper allowance.

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