For filing salaried return Form 16 is issued by the employer to its employees. Salaried Individual gets various allowance / expense under the head of Salary, which are either tax free or exempt from salary income.
This article talks about various Allowances Under Section 10 and extent to which they are exempted.
Exempted Allowances
Gross Salary includes Salary, Value of Perquisites and Profit in lieu of Salary. To arrive at Net Salary deduct exempted allowances. These details are available in Form 16 / Salary Slip.
Nature of exempted allowance and maximum exemption available is given below:
| Section | Nature of Allowance | Exempted Amount |
| Sec 10(5) | Leave Travel concession/assistance (LTA) | Actual expenditure incurred |
| Sec 10(6) | Remuneration received as an official, by whatever name called, of an embassy, high commission etc. | Actual remuneration received |
| Sec 10(7) | Allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India for rendering service outside India | Actual allowances or perquisite paid |
| Sec 10(10) | Death Cum Retirement Gratuity Received | as per gratuity provisions |
| Sec 10(10A) | Commuted value of pension received | (a) in a case where the employee receives any gratuity, the commuted value of one-third of the pension which he is normally entitled to receive, and (b) in any other case, the commuted value of one-half of such pension |
| Sec 10(10AA) | Earned leave encashment on Retirement | Any earned leave encashed |
| Sec 10(10B) First proviso | Compensation limit notified by CG in the Official Gazette | (i) an amount calculated in accordance with the provisions of 12clause (b) of section 25F of the Industrial Disputes Act, 1947 (14 of 1947) ; or (ii) such amount, not being less than fifty thousand rupees, as the Central Government may, by notification14 in the Official Gazette, specify in this behalf,] whichever is less |
| Sec 10(10B) Second proviso | Compensation under scheme approved by the Central Government | (i) an amount calculated in accordance with the provisions of 12clause (b) of section 25F of the Industrial Disputes Act, 1947 (14 of 1947) ; or (ii) such amount, not being less than fifty thousand rupees, as the Central Government may, by notification14 in the Official Gazette, specify in this behalf,] whichever is less |
| Sec 10(10C) | Amount received/receivable on voluntary retirement or termination of service | In case of voluntary retirement amount should not exceed five lakh rupees. In case of termination of service full amount. |
| Sec 10(10CC) | Tax paid by employer on non Monetary Perquisite | Actual tax paid |
| Sec 10(13A) | Allowance to meet expenditure incurred on house rent (House Rent Allowance House Rent Allowance) | Least of the following is exempt:a) Actual HRA Received b) 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Madras) c) Rent paid minus 10% of salary * Salary= Basic + DA |
| Sec 10(14)(i) | Prescribed Allowances or benefits (not in a nature of perquisite) specifically granted to meet expenses wholly, necessarily and exclusively and to the extent actually incurred, in performance of duties of office or employment e.g. Children Education Allowance, Hostel Expenditure Allowance, Uniform Allowance | Such expenses are actually incurred for that purpose |
| Sec 10(14)(ii) | Prescribed Allowances or benefits granted to meet personal expenses in performance of duties of office or employment or to compensate him for increased cost of living | Such expenses are actually incurred for that purpose |
| Any Other | Provide Description If ‘Any Other’ is selected for Exempt Allowance. |
While filing ITR 1 Form, you should check for above specific heads in Form 16. If not clearly mentioned then the same can be found from the Salary slips.
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