Tax Exemption Limits for Allowances & Reimbursements Paid


Monetary benefits provided to employees to meet expenses other than the basic salary.


Compensations paid by an organisation for out-of-pocket expenses incurred or overpayment made by an employee.

Taxation Benefits

Taxpayers can claim exemptions under existing/old tax regimes. The new regime offers limited exemption options but has lower tax rates.

List of Allowances & Reimbursements

House Rent Allowance Dearness Allowance Leave Travel Allowance City Compensatory Allowance Special Allowance

1. 2. 3. 4. 5.

List of Allowances & Reimbursements

Overtime Allowance Children Education Allowance Hostel Expenditure Allowance Fixed Medical Allowance Phone Bills Reimbursement

6. 7. 8. 9. 10.

House Rent Allowance (HRA)

A minimum of the following is exempted: Actual HRA received. 50% of annual salary (if living in metro cities, else 40%). Excess of annual rent paid over 10% of annual salary.

Dearness Allowance  (DA)

Fully taxable for every salaried taxpayer, irrespective of a government employee or non-government employee.

Leave Travel Allowance (LTA)

Employees who receive LTA from their employers can claim exemption subject to a few rules.

City Compensatory Allowance & Special Allowance

Fully Taxable

Overtime Allowance

Some employers compensate for the overtime done by employees. It is taxable in the employee's hands.

Children's Education Allowance

Eligible for deduction. Max exemption: Rs. 100/month, Rs. 1200/year, 2 children. Deductions for fees paid are allowed under section 80C.

Hostel Expenditure & Fixed Medical  Allowance

Refer to the above image to understand the allowances.

Phone Bill  Reimbursement

The reimbursement amount received by you on the submission of the bills will be tax-exempt in your hands.

Point to Note

Standard Deduction is not an allowance but is a deduction allowed on your gross salary.

Earn 9 - 11%  Fixed Returns

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