{"id":3848,"date":"2020-11-24T20:56:34","date_gmt":"2020-11-24T15:26:34","guid":{"rendered":"https:\/\/razorpay.com\/learn\/?p=3848"},"modified":"2022-10-03T16:13:08","modified_gmt":"2022-10-03T10:43:08","slug":"income-tax-allowances-salaried-individuals-india","status":"publish","type":"post","link":"https:\/\/razorpay.com\/payroll\/learn\/income-tax-allowances-salaried-individuals-india\/","title":{"rendered":"Income Tax Allowances Applicable to Salaried Individuals"},"content":{"rendered":"<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\"><strong>Allowances<\/strong> &#8211; Perks of being a salaried individual. Every employer pays different allowances to employees during their regular job duty. And, employees can use these allowances to save their income tax\u00a0every year.\u00a0\u00a0\u00a0<\/span><\/p>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Allowances are a part of employees\u2019 CTC (Cost-to-Company) and are paid in addition to basic salary. Generally, these allowances are provided to cover expenses like house rent, children\u2019s education or travelling.\u00a0<\/span><\/p>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">But, there might be a price for perks. These allowances can be partially or fully taxable, depending on the type. On the other hand, some of them are even exempt from income tax.<\/span><\/p>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Let\u2019s decode different salary allowances, their taxability, and how should employees save their maximum tax.<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d4fb0834984\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d4fb0834984\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/payroll\/learn\/income-tax-allowances-salaried-individuals-india\/#House-Rent-Allowance-HRA\" >House Rent Allowance (HRA)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/payroll\/learn\/income-tax-allowances-salaried-individuals-india\/#Leave-Travel-Allowance-LTA\" >Leave Travel Allowance (LTA)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/payroll\/learn\/income-tax-allowances-salaried-individuals-india\/#Standard-Deduction-Replacing-conveyance-and-medical-allowance\" >Standard Deduction (Replacing conveyance and medical allowance)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/payroll\/learn\/income-tax-allowances-salaried-individuals-india\/#Education-Allowance\" >Education Allowance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/payroll\/learn\/income-tax-allowances-salaried-individuals-india\/#Books-and-periodicals-Allowance\" >Books and periodicals Allowance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/payroll\/learn\/income-tax-allowances-salaried-individuals-india\/#Food-coupons-Tax-exemption\" >Food coupons Tax exemption<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/payroll\/learn\/income-tax-allowances-salaried-individuals-india\/#Gifts-and-vouchers-provided-by-the-employer\" >Gifts and vouchers provided by the employer<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/razorpay.com\/payroll\/learn\/income-tax-allowances-salaried-individuals-india\/#How-you-can-make-taxes-easier-for-employees\" >How you can make taxes easier for employees\u00a0<\/a><\/li><\/ul><\/nav><\/div>\n<h2 data-speechify-sentence=\"\"><span class=\"ez-toc-section\" id=\"House-Rent-Allowance-HRA\"><\/span><strong>House Rent Allowance (HRA)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Salaried individuals can use HRA to reduce their taxes only if they live in rented accommodation. This allowance covers rent expenses for employees and provides a tax benefit.\u00a0<\/span><\/p>\n<h3 data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">What is the HRA deduction amount?\u00a0<\/span><\/h3>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">The maximum amount of HRA that employees can claim is the least of the following amount.\u00a0<\/span><\/p>\n<ul data-read-aloud-multi-block=\"true\">\n<li style=\"font-weight: 400;\" data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Actual HRA received in a financial year<\/span><\/li>\n<li style=\"font-weight: 400;\" data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Total rent paid for the year less 10% of basic salary + Dearness Allowance (DA)<\/span><\/li>\n<li style=\"font-weight: 400;\" data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">50% of basic salary + DA for those living in metro cities (40% for non-metros)<\/span><\/li>\n<\/ul>\n<h3 data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Is the owner\u2019s PAN mandatory?<\/span><\/h3>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Employees need to provide their landlord\u2019s PAN if total rent paid during the year exceeds Rs 1 lakh in a financial year. While making tax declarations, employees should provide rent receipts and the owner\u2019s PAN wherever applicable.\u00a0<\/span><\/p>\n<p data-speechify-sentence=\"\">[bctt tweet=&#8221;HRA benefit is not allowed under the new tax regime.\u00a0 Employees opting for the old tax regime can claim HRA and reduce their taxes.&#8221; via=&#8221;no&#8221;]<\/p>\n<h2 data-speechify-sentence=\"\"><span class=\"ez-toc-section\" id=\"Leave-Travel-Allowance-LTA\"><\/span><span style=\"font-weight: 400;\">Leave Travel Allowance (LTA)<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Employees receive LTA from their employers for travelling while they are on leave. This allowance is partially taxable under the Income Tax Act.\u00a0<\/span><\/p>\n<h3 data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">What are the conditions to claim LTA?<\/span><\/h3>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Here are certain factors that have to be considered before claiming LTA benefit.\u00a0<\/span><\/p>\n<ul data-read-aloud-multi-block=\"true\">\n<li style=\"font-weight: 400;\" data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Only <\/span><b>domestic travel<\/b><span style=\"font-weight: 400;\"> is covered<\/span><\/li>\n<li style=\"font-weight: 400;\" data-speechify-sentence=\"\"><b>Actual journey<\/b><span style=\"font-weight: 400;\"> should be undertaken\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Covers employee and <\/span><b>family members<\/b><span style=\"font-weight: 400;\">, where family members include spouse, children, brother, sister and wholly dependent parents. Allowed for a maximum of two children, if born after 1st October 1998<\/span><\/li>\n<li style=\"font-weight: 400;\" data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">LTA benefit cannot be claimed for travel on <\/span><b>official holidays and weekends<\/b><span style=\"font-weight: 400;\">. Employees should apply for leaves and travel during that period<\/span><\/li>\n<\/ul>\n<h3 data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">What is the maximum LTA benefit?<\/span><\/h3>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">The LTA benefit amount is limited to,\u00a0<\/span><\/p>\n<ul data-read-aloud-multi-block=\"true\">\n<li style=\"font-weight: 400;\" data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Actual travel cost &#8211; <\/span><b>Rail, air or bus fare<\/b><span style=\"font-weight: 400;\">. No expenses such as local conveyance, sightseeing, hotel accommodation, etc., are eligible, or<\/span><\/li>\n<li style=\"font-weight: 400;\" data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Actual LTA provided by the employer<\/span><\/li>\n<\/ul>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Whichever is lower.\u00a0<\/span><\/p>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">If LTA provided by the employer is Rs 54,000, and actual travel cost incurred by the employees is Rs 32,000. Then, the LTA benefit will be Rs 32,000 only. Remaining, Rs 22,000 will be added to the employee\u2019s taxable income.<\/span><\/p>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Employees are allowed only <\/span><b>two journeys<\/b><span style=\"font-weight: 400;\"> in a block of four calendar years. The block applicable for the current year is 2018-21.<\/span><\/p>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">To claim this benefit, employees must submit travel proofs like a boarding pass, train tickets, travel agency invoice, etc. to their employers. These proofs should be submitted along with the mandatory declaration.\u00a0<\/span><\/p>\n<h3 data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Maximum benefit based on different modes of transport<\/span><\/h3>\n<table data-speechify-sentence=\"\">\n<tbody>\n<tr>\n<td><span style=\"font-weight: 400;\">Air journey<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Air economy fare of the national carrier (Indian Airlines or Air India) by the shortest route to the place of destination<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Place of journey and destination connected by Rail<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Amount will be restricted to air-conditioned first-class rail fare by the shortest route to the place of destination<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Place of journey and destination not fully connected by Rail but connected by other recognised public transport systems<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Amount will be restricted to first-class or deluxe class fare by the shortest route to the place of destination<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Place of journey and destination not connected by other recognised public transport systems<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Amount will be restricted to the air-conditioned first-class rail fare, for the distance of the journey by the shortest route, as if the journey had been made by rail<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h3 data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">What if an employee didn\u2019t claim LTA exemption in one block?<\/span><\/h3>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">If an employee has not claimed LTA exemption for one or two journeys in the block of 4 years, they can carry over such benefit to the next block. However, they will have to claim this benefit in the first year of the next block.\u00a0<\/span><\/p>\n<h3 data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">What if an employee travels to multiple destinations?<\/span><\/h3>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">The LTA benefit will be claimed for the travel cost eligible from the place of the journey to the farthest destination during the vacation period by the shortest possible route.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Standard-Deduction-Replacing-conveyance-and-medical-allowance\"><\/span><span style=\"font-weight: 400;\">Standard Deduction (Replacing conveyance and medical allowance)<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">A standard deduction of Rs 40,000 was introduced for salaried individuals in Union Budget 2018. This deduction replaced the conveyance allowance of Rs 19,200 and medical reimbursement of Rs 15,000.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Both the allowances were subject to tax deduction if a valid conveyance or medical expense proof was provided by the employee. In order to benefit the salaried section, the government introduced this standard deduction. The deduction will be allowed to all salaried individuals and is not subject to any proof of expense.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The limit of the standard deduction was increased to Rs 50,000 in the Interim Budget 2019.<\/span><\/p>\n<h2 data-speechify-sentence=\"\"><span class=\"ez-toc-section\" id=\"Education-Allowance\"><\/span><span style=\"font-weight: 400;\">Education Allowance<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Employees are entitled to children education allowance from their employers. Any amount received over Rs 100 per month per child will be taxable.\u00a0<\/span><\/p>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">This benefit can be extended to a maximum of two children.\u00a0<\/span><\/p>\n<h2 data-speechify-sentence=\"\"><span class=\"ez-toc-section\" id=\"Books-and-periodicals-Allowance\"><\/span><span style=\"font-weight: 400;\">Books and periodicals Allowance<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Employees can claim reimbursement of expenses incurred on books, newspaper subscription, periodicals, journals and so on. These reimbursements are tax-free for employees.\u00a0<\/span><\/p>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">The maximum amount of reimbursement is limited to,<\/span><\/p>\n<ul data-read-aloud-multi-block=\"true\">\n<li style=\"font-weight: 400;\" data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Actual bill amount, or<\/span><\/li>\n<li style=\"font-weight: 400;\" data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Amount provided for books and periodicals in CTC<\/span><\/li>\n<\/ul>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Whichever is lower.\u00a0<\/span><\/p>\n<h2 data-speechify-sentence=\"\"><span class=\"ez-toc-section\" id=\"Food-coupons-Tax-exemption\"><\/span><span style=\"font-weight: 400;\">Food coupons Tax exemption<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Many employers provide food coupons to their employees as perquisites. These food coupons are exempt from tax up to Rs 50 per meal. So, if the whole month is considered based on 22 working days and 2 meals a day, the monthly benefit will be Rs 2,200 (Rs 50*22*2).\u00a0<\/span><\/p>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Employees can avail this tax benefit and claim Rs 26,400 under tax-free food coupons in a financial year.\u00a0<\/span><\/p>\n<h2 data-speechify-sentence=\"\"><span class=\"ez-toc-section\" id=\"Gifts-and-vouchers-provided-by-the-employer\"><\/span><span style=\"font-weight: 400;\">Gifts and vouchers provided by the employer<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Gifts or vouchers worth Rs 5,000 per year provided by the employer in cash or kind are exempted from income tax.\u00a0<\/span><\/p>\n<h2 data-speechify-sentence=\"\"><span class=\"ez-toc-section\" id=\"How-you-can-make-taxes-easier-for-employees\"><\/span><span style=\"font-weight: 400;\">How you can make taxes easier for employees\u00a0<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">While making tax declarations, employees often get confused with proofs to substantiate their declarations. The employer must provide a user-friendly platform to employees.\u00a0<\/span><\/p>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">A platform that can help employees understand the nature of proofs required for claiming various tax benefits. It should also provide insights on employees\u2019 tax liability under the dual tax regime. This will help employees choose the best-suited tax regime after making accurate tax declarations.\u00a0<\/span><\/p>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">We, at Razorpay, have built <a href=\"https:\/\/razorpay.com\/payroll\/?r=blog_cta_allowances\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\"><strong>RazorpayX Payroll Software<\/strong><\/a><\/span><span style=\"font-weight: 400;\">\u00a0to provide a user-friendly platform to employees. With this software, employees are guided at each step of the <\/span><a href=\"https:\/\/razorpay.com\/learn\/how-to-make-tax-declaration-form12bb\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">tax declaration<\/span><\/a><span style=\"font-weight: 400;\">. Right from demystifying the tax implications of different allowances &amp; <\/span><a href=\"https:\/\/razorpay.com\/learn\/section-80-80c-deductions-income-tax\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">deductions<\/span><\/a><span style=\"font-weight: 400;\"> to choosing the best tax regime for themselves, RazorpayX Payroll will serve everything to employees.\u00a0<\/span><\/p>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">Employees can access their payslips, Form-16, claim reimbursements, apply leaves and manage their attendance from anywhere and at any time with RazorpayX Payroll.\u00a0<\/span><\/p>\n<p data-speechify-sentence=\"\"><span style=\"font-weight: 400;\">It\u2019s time to provide employees with the best payroll experience with RazorpayX Payroll and help them save their hard-earned money.\u00a0<\/span><\/p>\n<div style=\"text-align: center;\" data-speechify-sentence=\"\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/payroll.razorpay.com\/signup?r=blog_cta_allowances\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Simplify Tax Declarations Now<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Allowances are a part of employees\u2019 CTC (Cost-to-Company) and are paid in addition to basic salary. Employees can use these allowances to save their taxes. <\/p>\n","protected":false},"author":151156469,"featured_media":3852,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3476,3404],"tags":[3487],"class_list":{"0":"post-3848","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-payroll-glossary","8":"category-payroll","9":"tag-allowances"},"_links":{"self":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/3848","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/users\/151156469"}],"replies":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/comments?post=3848"}],"version-history":[{"count":18,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/3848\/revisions"}],"predecessor-version":[{"id":6823,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/3848\/revisions\/6823"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media\/3852"}],"wp:attachment":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media?parent=3848"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/categories?post=3848"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/tags?post=3848"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}