Tax Exemption Limits for Allowances & Reimbursements Paid
Allowances
Monetary benefits provided to employees to meet expenses other than the basic salary.
Reimbursements
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 AllowanceDearness AllowanceLeave Travel AllowanceCity Compensatory AllowanceSpecial Allowance
1.2.3.4.5.
List of Allowances & Reimbursements
Overtime AllowanceChildren Education AllowanceHostel Expenditure AllowanceFixed Medical AllowancePhone 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.