Leave travel allowance (LTA): The amount spent on travelling is non-taxable only for a total of two trips on a block of four years can be claimed for exemption for travel done inside India.
- If the journey is performed by rail; railway-fare in first AC class by shortest route to destination.
- Where places of origin and destination are connected by rail but the journey is performed by any other mode then first AC class fare by shortest route to the place of destination.
- Where place of origin of journey and destination, or part thereof, are not connected by rail and journey is performed by any other transport; then (i) If a recognized public transport system exists between such places the first class or deluxe class fare of such transport by shortest route, or, (ii) If in other case, first AC class fare for the distance of the journey by the shortest route, as if the journey has been performed by rail.
Leave encashment: Those payments received in the form of leave encashment received by Central & State Government employees at the time of retirement in respect of the period of earned leave at credit is fully exempt. Whereas in the case of other employees, the exemption is to be limited to minimum of all below:
- The actual amount received
- The cash equivalent of leave balance (max 30 days per year of service)
- Maximum of 10 months of leave encashment, based on last 10 months average salary
- Rs.3 Lakh
Performance Incentive / Bonus: This is a component which would be fully taxable.
Medical allowance/Reimbursement: This particular component is on-taxable up to 15000 per year (or Rs 1250 per month) on producing medical bills required.
Food Coupons: This component is non-taxable upto 50 Rs per meal. So a 22 days working month and one meal per day would make Rs 1100 as nontaxable. Sodexo or Accor ticket coupons may also be provided by employer for same.
Periodical Journals: This particular component could become nontaxable on providing original bills as some employers may provide component for buying magazines, journals and books as a part of knowledge enhancement for business growth.
Professional Development Allowance: This allowance may become non-taxable if the original bills are submitted to employer. Generally reimbursement facility is available for those payments done towards any technical course fee, certification etc done to enhance professional knowledge.
Uniform / Dress Allowance: Under certain cases some sections of employees may get allowance for purchase of office dress/uniform as the component would become non-taxable.
Telephone reimbursements: Most of the companies and institutions provide a component for telephone bills. Employees can submit their actual phone usage bills to reimburse this component and make it non-taxable.
Internet Expenses: Similar to the phone bills the employer may also provide reimbursement of internet expenses and thus this would become nontaxable.
Car expense reimbursements: An amount of Rs.1800 per month would be nontaxableon showing bills for fuel or can maintenance, if in case company provides component for this and employee use self-owned car for official and personal purposes. Whereas in the case of a car with capacity morethan 1600cc this amount would be Rs 2400.
Driver salary: An amount ofRs 900 per month may become non-taxable if the employee pays driver salary for self-owned or company owned carand if employer provides component for it.
Gift from relatives’vs non relatives: All the gifts from relatives would be non-taxable with no limits attached. Following relations are covered under non-taxable rule:
- Spouse of the individual
- Brother or sister of the individual
- Brother or sister of the spouse of the individual
- Brother or sister of either of the parents of the individual
- Any lineal ascendant or descendant of the individual
- Any lineal ascendant or descendant of the spouse of the individual, Spouse of the person referred to in clauses (2) to (6).
If gifts received from non-relative persons is worth more than Rs.50000, one is liable to pay the tax on whole value. Gift can be in form of a sum of money (in cash/cheque/bank draft/electronic transfer) or any articles.