TDS on Salaries - Income Tax Department

awarded “Param Vir Chakra” or “Maha Vir Chakra” or “Vir
Chakra” or such other gallantry award as may be specifically
notified by the Central Government.
3.4.2 Exemption of Allowances: There are various other
receipts besides the above given regularly in addition to salary for
meeting specific requirements of the employee. These are referred
to as allowances, in common parlance and taxability of some of
these are discussed here.
(i) Leave travel concession: - The value of any travel
concession or assistance accrued by or due to an employee
from his employee or former employer in connection of his
proceeding on leave (a) to any place in India (b) to any place
in India on retirement or after termination of service. The
amount exempt as prescribed in Rule 2B is the amount actually
incurred on performance of travel on leave in India by the
shortest route to that place, subject to economy air fare or
A.C. Ist class fare. This exemption is available only in respect
of two journeys in a block of 4 calendar years.
(ii) House Rent allowance - House rent allowance granted to
the employee is exempt u/s 10(13A) to the following extent;
Provided expenditure on rent is actually incurred, the amount
of exemption granted is the least of
(1) HRA received
(2) Rent paid Less 10% of salary
(3) 40% of salary (50% in case of Mumbai, Chennai, Kolkata &
Delhi) salary means bonus + Dearness allowance. where
provided by terms of employment.
It has to be noted that only the expenditure actually incurred
on payment of rent in respect of residential accommodation occupied
by the assessee subject to the limits laid down in rule 2A, qualifies
for exemption from income-tax. Thus, house rent allowance granted
to an employee who is residing in a house/flat owned by him is not
exempt from income-tax. The disbursing authorities should satisfy
themselves in this regard by insisting on production of evidence of
actual payment of rent before excluding the house rent allowance
or any portion thereof from the total income of the employee.
Though incurring actual expenditure on payment of rent is a
Perquisite for claiming deduction under section 10(13A), it has been
decided as an administrative measure that salaried employees
drawing house rent allowance upto Rs. 3,000 per month will be
exempted from production of rent receipt. It may, however, be noted
that this concession is only for the purpose of tax deduction at source,
and, in the regular assessment of the employee, the Assessing
Officer will be free to make such inquiry as he deems fit for the
purpose of satisfying himself that the employee has incurred actual
expenditure on payment of rent.
(iii) Allowances exempt u/s 10(14): Certain allowances given
by the employer to the employee are exempt u/s 10(14) w.e.f.
1-7-1995, all these exempt allowance are detailed in Rule 2BB
of Income Tax Rules and are briefly given below:
(i) Allowance granted to meet cost of travel on tour or
transfer.
(ii)
Allowance granted on tour or journey in connection with
transfer to meet the daily charges incurred by the
employee.
(iii) Allowance granted to meet conveyance expense incurred
in performance of duty, provided no free conveyance is
provided.
(iv) Allowance granted to meet expenses incurred on a helper
engaged for performance of official duty.
(v) Academic, research or training allowance granted in
educational or research institutions.
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