Tax exemptions are a way to reduce the chances of being taxed. Many people don’t know what tax exemptions mean, so we are here to help you out. To get the full details about tax exemptions, read on.
1. House Rent Allowance (HRA) exemption
House rent allowance is a tax-free benefit provided to employees by their employers to cover their accommodation expenses. HRA is a part of your salary which can be claimed as deductions from your annual income. It can be claimed in the form of cash, kind or any other specified item. In case you have no house rent and you can’t pay any amount towards your accommodation then also you can claim this benefit by filling out the right form with your employer. To know the exact amount of money you can save you can use a reliable hra exemption calculator
2. Exemption of Leave Encashment
Encashment of leave provided by an employer is not taxable. If you are eligible for encashment of leave, then you can receive the same amount of salary as if you have been working for the company. You need to inform your employer that you want to opt for this option as it will enable you to save income tax on your salary.
3. Exemption from the Receipt Upon Opting for Voluntary Retirement
If you opt for voluntary retirement and receive a lump-sum amount, then this lump-sum amount will be exempt from income tax. However, if you opt for voluntary retirement with an expectation of getting a pension or any other type of benefit from your employer in future, then this amount will be taxable.
4. Medical Insurance
Medical insurance is an important part of your life, so it’s important to take it seriously. If you have an accident or illness, you’ll be less likely to lose your job because of it. To save money on medical insurance premiums, you should get a high deductible plan. A high deductible plan means that only a small percentage of the cost will be reimbursed by your insurance company. You’ll still be required to pay the rest out-of-pocket, but this way you won’t have high premiums for years at a time.
5. Employee Contribution to Provident Fund (PF)
The employee contribution to provident fund (PF) is a compulsory contribution by employees towards retirement funds for their dependents/family members under the age of 18 years old or persons with disabilities. The employer deducts this amount from the employee’s salary before remitting it to the concerned Provident Fund Organisation (PFO). This amount will normally be added to gross salary as per Income Tax laws. You can claim deductions on this. You can use a pf calculator online to plan your exemptions
6. Leave Travel Allowance (LTA) exemption
LTA is a statutory benefit that provides for reimbursement of expenses incurred by an employee while travelling on leave with his/her employer as per rules laid down by the government of India. It can be claimed by an employee who travels to places like his home town, parents’ place or other places outside office premises for training, deployment etc., during the period of leave granted by his employer
7. Standard Deduction
You have to make an employee contribution to the provident fund every month, but you can’t claim any tax deduction on it. However, if your employer makes a matching contribution towards your PF, then you can claim a tax deduction at the source on this amount of money which can help you save more than Rs1 lakh in taxes every year!
