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11 Least Known Allowances to Save Tax

Allowance
Allowance

As per Wikipedia, An Allowance is an amount of money allotted or given usually at regular intervals for a specific purpose. Allowance is given in addition to salary to meet specific requirements of salaried employee. In India, Income Tax Planning is very myopic. It is only restricted to investment, investment and investment. As i highlighted in my post, 7 Financial Mistakes You should Avoid that “FREE ADVICE” is responsible for this myopic approach towards tax planning. A tax planner should look beyond “Investments”. He should provide 360 degree guide to tax payer on how to SAVE TAX. Allowances and Perquisites are 2 such tax saving buckets / instruments. An Allowance and Reimbursement can be used interchangeable. An allowance paid against actual bills is referred as Reimbursement which is fully exempted from income tax. In this post, we will cover 11 least known allowances which can help you to save tax. In next post, i will discuss perquisites.

To emphasis on the importance of allowances, let me share recent example of one of my client Ms. Roshni Juneja from Mumbai. Three Months back she changed her job and got salary hike of 30%. She was quite excited about her new job. When she received her first salary, it was a shocker. Increase in her monthly take home salary was just 8%. Reason being, Salary structure of old employer was tax friendly i.e. loaded with allowances and perquisites whereas new employer’s salary structure is flat. Though her salary increased by 30% but only on papers. Net take home salary increased by just 8%. Being a novice she was not aware of taxability of allowances and her income tax planner also never informed her.

Another misconception is that allowances are over and above salary. Technically it is correct and as i shared in definition also that these are given in addition to salary. Please note that currently all private sector employees have CTC (Cost to Company) structure. The total CTC remains same. It include basic, variable, perquisites, allowances etc. Employee can select various tax friendly components to reduce tax outflow. It is advisable to keep basic salary minimum and opt for max tax friendly components like Allowances, Reimbursements and Perquisites. It will help to reduce your tax outflow considerably.

As a salaried employee we are aware of some of the most popular allowances like House Rent Allowance, Leave Travel Allowance, Medical Allowance and Travelling/Transport Allowance. Travelling allowance is increased from Rs 800/month to Rs 1600/month from FY 2015-16. There are whole lot of not so popular allowances which help you to save tax. Most of these allowances are exempted u/s 10(14) and are detailed in Rule 2BB of income tax rules. Under this rule, the allowance is allowed irrespective of the name assigned by the organization. For example uniform reimbursement is also referred as wardrobe reimbursement by some companies. Only pre-condition is that nature of the same should be as defined under Income Tax Act. Please note that these allowances are available only for individual salaried employees. I do agree that employer design the salary which is standard for all employees. Some of the tax friendly allowances may or may not be part of salary structure. An employee can always request for inclusion of the same to reduce tax outflow. Employee can also negotiate at the time of accepting job offer.

11 Least Known Allowances to Save Tax

1. Uniform Allowance: One of my favorite as there is no max limit to it. It is fully exempted from income tax on actuals. Employee has to produce bills to claim the same. This allowance is given to meet the expenditure on the purchase and maintenance of office uniform for wear while performing office duties. In this case, uniform does not necessarily mean like school uniform or uniform of workers in factory. Generally all offices have dress code i.e. employee should be smartly dressed in formals. In this case, according to dress code of the office, an employee can claim uniform reimbursement for formal clothes purchased for office wear.

2. Mobile / Telephone Reimbursement: If your office duty require mobile / telephone / internet connection. You can claim 100% exemption against billed amount by producing actual bills. For example IT Professionals, employees in sales function, HR, Middle Management etc can claim exemption. Some employers take declaration from employees i.e. segregation of personal and official calls whereas others are liberal. In few cases, i observed that there is monthly cap normally of Rs 2000 per month. Please note that reimbursement can be claimed only for Postpaid Connections.

3. Children Education Allowance: Under this head, you can claim exemption of max Rs 100 per month per child for a maximum of 2 children. Payment Receipts are not required to claim exemption therefore it is not a reimbursement. Though amount is small but if you have 2 school going children then you can claim Rs 2400 p.a. This allowance is paid to meet the education expenses of a child.

4. Children Hostel Allowance: If your child / children are staying in hostel then you can claim max exemption of up to Rs 300 per month per child for a max of 2 children. Payment receipts are required by the employer to claim income tax exemption. You can claim max Rs 7,200 p.a. for 2 children.

5. Soft Furnishing Allowance:In this head, employee is allowed to buy some household items or pay for soft furnishing of the house. Original bills are required for reimbursement. Normally there is a max cap depending on the hierarchy of the organization. Max reimbursement is limited to justify the same. For Mid-Managers, Soft Furnishing Reimbursement is restricted upto Rs 50,000 depending on the salary of person. The reason for soft furnishing reimbursement is that employee need to entertain guests at his residence for official purpose and expense incurred to protect office furniture at residence.

6. Newspaper, Books and Periodicals: Some professions demand an employee to keep abreast with latest happenings relating to profession e.g. medical, finance, legal etc. Therefore employee can purchase newspapers, books, periodicals etc and submit actual bills for reimbursement. It is fully exempted from income tax on actuals. Some organizations cap the max limit to Rs 1000 per month.

7. Reimbursement of Conveyance Expenses: If the job require lot of Local travelling like front end staff, sales employees, collection agents etc. An employer can reimburse actual expense incurred by the employee at actuals. Amount received is fully exempted from income tax. Only 2 conditions should be fulfilled (a) Employee is not receiving transport allowance and (b) Employee should maintain log book with respect to travelling and corresponding expense. Exemption is available only against actual bills, reimbursement without bills is taxable. Conveyance expenses should be incurred only for performance of official duty.

8. Daily Allowance: If your normal place of duty is not fixed and you have to travel to different places. Your employer can include Daily Allowance to meet ordinary daily charges incurred, if you are absent from normal place of duty. Reimbursement received is fully exempted from income tax against actual bills. It can be granted either on tour or period of journey in connection with transfer.

9. Research Allowance: Any amount spent & reimbursement claimed by employee for academic research or other professional pursuits including training, short term / online course etc. is fully exempted from income tax on production of actual bills.

10. Tour Allowance: Though there is no formal name for this but any allowance granted to meet the cost of travel on tour or being transferred from one place to another. Reimbursement is fully exempted from income tax against actual expenditure incurred. It also include cost towards movers and packers.

11. Helper Allowance: You can hire or engage helper who can help you in performance of official duties. Any expenditure incurred is fully exempted from income tax on actual value.

Through intelligent tax planning, you can save tax outside “Investments” also. Depending on your job profile and nature of job, you can discuss with your employer to include above mentioned allowances in your salary structure. It can help to reduce your tax outflow.

Copyright © Nitin Bhatia. All Rights Reserved.

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Babu Kanjariya
Babu Kanjariya
9 years ago

HI, Thanks for the use full post. I am regular redder of your blog and getting very use full information.
I have query about Term Insurance.
1. from Which Insurance Comp/Bank reliable for term insurance ?
2. for Rider of Partial/Full Disability and Critical illness feasible with term insurance ?
3. what to check for insurance Comp/Bank its Claim Ratio or any other future ??

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Babu Kanjariya
Amit
Amit
9 years ago

Hi Nitin,

I am the regular reader of your posts. Would like to tell you that Your posts are very informative and helpful.
I have a query regarding the Medical Allowance. I am being paid Medical allowance of Rs.1250 Per month by my employer.

I could not submit the medical bills to my employer to get the exemption under section 10.

Can i claim the Exemption while filling the return?

If Yes, can you give me a pointer to the Income tax website where it is mentioned? My Tax Consultant is saying this cannot be claimed while filling the Income Tax Return. I want to show him some Proof.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Amit

It is medical reimbursement not medical allowance. If you have not produced the bills then you cannot claim now i.e. at the time of filing the return.

Amit
Amit
9 years ago
Reply to  Nitin Bhatia

Medical Allowance and Medical reimbursement both are different.

Medical reimbursement is the amount paid by the employer to the employee, when employee actually incurs the expenses on Medical and on submission of the bills amount is given to the employee.

Medical reimbursement upto Rs. 15000 is non taxable. Over and above Rs. 15000 gets added to your salary and becomes taxable.

When i was working with WIPRO, i was eligible for medical reimbursement upto Rs. 20000, with Production of the Bills. Once i claimed Rs. 20000 completely, then Rs. 5000 was taxable for me.

Please Note that Rs. 20000 was not part of my CTC.

Medical Allowance is the amount paid to the employee, whether the bills are submitted or not.
Medical Allowance is the Part of the CTC.

If Bills are submitted then it is exempted from tax with Limit of Rs. 15000.
If Bills are not submitted then it gets added to the salary and becomes taxable.

So Medical allowance will be paid to the employee even if the expenses are not incurred, it will just make the allowance taxable.

So my question is still same, if i could not submit the bills to my employer then whether i can claim the exemption while filling the return or not?

It is Same as LTA and HRA, i hope that we can claim the LTA and HRA while filling the return, if not claimed with the employer.

Regards
Amit

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Amit

Yours is Medical Reimbursement. Medial Allowance is fully taxable. Though your company is paying on monthly basis therefore Medical Reimbursement should not be confused with Medical Allowance. As the bills are not submitted therefore now you cannot claim tax deduction.

LTA and HRA are allowance with different tax treatment. You may check my posts on LTA and HRA.

Tarun Rastogi
Tarun Rastogi
8 years ago

Hi Nitin,

Your post is very informative and helpful in tax planning.

I have one query is soft furnishing reimbursement allowed as exemption or taxable

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Tarun Rastogi

It is allowed as an exemption.

Akansha
Akansha
8 years ago

Hi Nitin,

Thanks for sharing this information. Just a small query. Can a CTC have petrol reimbursements of Rs.1800 per month (wherein we assume that the employee is using the vehicle for partly official and partly personal purpose) plus the transport allowance of INR.1600 p.m at the same time.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Akansha

You cannot claim both together.

Raghu
Raghu
8 years ago

Hello Sir,
Can we put it in one basket of all these tax exempted reimbursement as “Flexi Basket”

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Raghu

It is feasible. you may create Flexi Basket and Employee may select as per convenience.

Raghu
Raghu
8 years ago
Reply to  Nitin Bhatia

thanks sir

Rahul Malagikar
Rahul Malagikar
8 years ago

Hi Nitin,

In the above post, I saw Uniform Allowance is Tax exempted and there is no max limit to it. Also you stated that it should not necessarily be a uniform, but a office Dress Code policy which tells to be formally dressed, such office employees can also avail the benefit of Tax exemption.
In my office it is suggested to wear formals in office hours(no uniform for employees). So can apply for tax exemption on the same.

Nitin Bhatia
Nitin Bhatia
8 years ago

You may avail provided your employer provide Uniform allowance.

Dr-Narendra Beniwal
Dr-Narendra Beniwal
8 years ago

Hi Nitin,
Please let me know in which section of income tax return form I should fill the amount spent on Books and periodicals, soft furnishing allowance and transport allowance for getting tax rebate on these.

Dr-Narendra Beniwal
Dr-Narendra Beniwal
8 years ago

Please Address my query

Nitin Bhatia
Nitin Bhatia
8 years ago

These allowances are paid by employer. Transport allowance is an Allowance exempt under section 10 in ITR. Soft Furnishing Allowance is non-monetary perquisite u/s 10(10CC). Books and periodicals is reimbursement from an employer.

VEL HR
VEL HR
8 years ago

Sir,
Is Entertainment Allowance taxable? Please clarify.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  VEL HR

It depends whether you are Govt employee or pvt sector employee.

Nitin Bhatia
Nitin Bhatia
8 years ago

Thanks for sharing link. It is subjective, companies have turnaround for same. They define formal dress code. The exemption is not applicable only if there is No Dress code and employee is free to wear any dress.

Sejal Kumar Jain
Sejal Kumar Jain
8 years ago

Dear Nitin, Thank for the information. Can you please provide any case laws on uniform allowance, which states that a formal wear is also get exempt from tax?

Nitin Bhatia
Nitin Bhatia
8 years ago
Nandi
Nandi
8 years ago

Sir will u please say me whether it is necessary to submit a bill against allowances, is there any provision or law available.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Nandi

It depends on the type of allowance. For example, for daily allowance bill is not required whereas for uniform or soft furnishing allowance you need bills.

Rahul Munjal
Rahul Munjal
8 years ago

What type of logbook is required in case of travel allowances?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Rahul Munjal

You can get from stationery shop or you maintain at your end. It should mention date, from, to, mode of travel, expense, purpose, bills etc.

Nitin Bhatia
Nitin Bhatia
8 years ago

As i mentioned in my other comments that if company has defined “formal” dress code then uniform allowance can be provided. Its an operational hassle for organization to collect and verify bills therefore easy route is to withdraw the same. It is subjective. The exemption is not applicable only if there is NO Dress code and employee is free to wear any dress.

saiju
saiju
8 years ago

I don’t have own vehicle. Have any chance to get the exception of head fuel reimbursment

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  saiju

You can hire a vehicle and the claim fuel reimbursement. It is subject to condition that your company is providing this facility.

PRABODH HARI HARDIKAR
PRABODH HARI HARDIKAR
8 years ago

At Sr No. 9 above , ie Research Allowance is stated. Whether any books purchased pertaining to the profile of the employee can be considered for exemption of the allowance.? In short whether books purchased and used for the additional knowledge in the field of employment can be considered for exmption?

Nitin Bhatia
Nitin Bhatia
8 years ago

Yes it can be considered but it is at the sole discretion of your employer. Basically, your employer should be convinced that these books are required for professional development or related to your current job.

Jeet
Jeet
8 years ago

Is the brokerage paid to broker for house search also included ? P.S. My broker told me that I may show his receipt for tax deduction purposes.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Jeet

You have not mentioned whether you are renting a property or buying a property.

Jeet
Jeet
8 years ago
Reply to  Nitin Bhatia

Rent. thanks

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Jeet

Brokerage paid for renting a property is not allowed for tax deduction.

saiju
saiju
8 years ago

Reagaring the Telephone allowance exception, which type of bills are acceptable. Both post paid and prepaid billcan be submitted or not. Indivial or family members bill can show for this purpose. Can you provide me related income tax caluse regarding the telephone allownace expeption

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  saiju

Only postpaid bills in the name of employee are acceptable. It is basically a reimbursement from employers end.

saiju
saiju
8 years ago

How will get the recepit and supporting documents of donation making to Prime Minister National Relief Fund. For getting this excpetion which are the docuements to be produced

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  saiju

The donation receipts are sent by India Post. You only need donation receipt to claim the tax deduction.

MITHILESH
MITHILESH
8 years ago

Salary of Govt employee contains BASIC PAY, GRADE PAY,DA only. Can Transport allowance be claimed for commuting to office from home to perform duty. Please note in salary its not explicitly mentioned. Can Rs 1600 per month can be claimed.If yes under which section.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  MITHILESH

As allowance is paid and not reimbursed/claimed therefore if your employer is not paying transport allowance then you cannot claim. If transport allowance is not paid then you can get reimbursement for conveyance expense subject to the policy of your employer.

MITHILESH
MITHILESH
8 years ago
Reply to  Nitin Bhatia

Thank you Nitin for clarifying the doubt and quick reply .

Satendra
Satendra
8 years ago

I buy newspapers at home on my own. Can I claim the tax exemption while filing individual return through my CA. I’m salaried employee.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Satendra

No. It is reimbursement not an exemption.

SKNGOA
SKNGOA
8 years ago

I am Class C Govt employee, My TA is Rs 800/- Pm . What is maximum tax rebate I can get
as per latest rule for FY 2015-16?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  SKNGOA

From current FY the Transport Allowance exemption is doubled to Rs 1600 per month from earlier Rs 800 per month but as you are receiving Rs 800 p.m. therefore you can only claim max Rs 800 p.m. You can also check with your department why it is not increased in your case.

kapil arya
kapil arya
8 years ago

my basket of allowance is 73000 per month and my basic salary is 38000 per month. So how much income tax will be deducted from my salary monthly?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  kapil arya

It required detailed calculation. You may check with your HR department or CA.

ameya dhok
ameya dhok
8 years ago

hello,
i am in PSU, we are getting telephone reimbursement as per our designation. can this amount exempted from taxable income?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  ameya dhok

It is tax free.

Ayush Bhatnagar
Ayush Bhatnagar
8 years ago

Hello Sir,
If a Person is an employee of a corporate company then what the person should do to save his income tax without using section 80C?
And If Company is providing him Bonus & HRA then what should he do to save tax,In this condition is it necessary to use section 80C or not?

Nitin Bhatia
Nitin Bhatia
8 years ago

It is not necessary to save tax u/s 80C. You can claim HRA. Other options are allowances and perquisites that i have shared in my posts.

Anup Deosthalee
Anup Deosthalee
8 years ago

My Company is reimbursing petrol bills. Is it taxable under my personal account ?

Nitin Bhatia
Nitin Bhatia
8 years ago
Pawan Sharma
Pawan Sharma
8 years ago

hello sir
I have star health insurance policy .
it is under section 80d provide to tax benefit 20000 or it is benefit under to section 80 means 150000(max)

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Pawan Sharma

You can claim benefit u/s 80D.

Nitin Devnani
Nitin Devnani
8 years ago

Hello sir ,
I bought a cell phone worth 35k. Can I file that in my income tax return? If yes then under which category.
Thanks in advance.

Nitin devnani

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Nitin Devnani

It is not clear why you want to file a mobile purchase in ITR.

Nitin Devnani
Nitin Devnani
8 years ago
Reply to  Nitin Bhatia

To get tax benefit

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Nitin Devnani

You cannot claim tax benefit on mobile phone purchase.

Nitin Tripathy
Nitin Tripathy
8 years ago

Dear Sir,

I have missed to make few reimbursements from my organization in last FY i.e. 2014-1. Can I still apply for that reimbursement & Will i get tax benefit on that amount? Pl advice.

Regards
Nitin Tripathy

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Nitin Tripathy

No. Reimbursement is provided by organization against actual bills and they must have paid the taxable amount to you after deducting TDS. Therefore, now you cannot claim tax benefit.

Rajeev Pandey
Rajeev Pandey
8 years ago

I am a Central PSU employee of E3 level,I am availing Conveyance or Transport Allowance since year 2007 (40 Liters Petrol ) but unfortunately I had not given such benefit from April 2009 and Rs. 800/- given as Transport Allowance upto March 2015.
On observing my salary slip, it is observed that no Transport Allowance is mentioned in my salary slip for tax exemption purpose.
Please advice what we have to do.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Rajeev Pandey

It is not mandatory and decided by the employer. It also depend on the job profile. You may check with HR in your organization.

Nikhil
Nikhil
8 years ago

Hello Nitin,
Thanks for this wonderful article.
Just want to know with effect from FY 2016, under Telephone reimbursements, can i claim my Broadband/Internet expenses.
I am not using any landline in this, but just the broadband connection?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Nikhil

You can claim.

Harjot Sahota
Harjot Sahota
8 years ago

I am a salaried individual with current CTC which goes upto 30% Tax liability currently working in Marketing Feild,
Can you let me know what are the MAX Limits for below Tax saving allowance
Helper Allowance
Driver allowance
Uniform Allowance
InterNet Allowance

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Harjot Sahota

Please go through the post on this page and following post
https://www.nitinbhatia.in/personal-finance/10-perquisites-that-can-help-in-tax-savings/

SKNGOA
SKNGOA
8 years ago

Due to oversight of Govt . Accountant, made short TDS of an amount Rs 8000/- of one employee Mr Milind for Assessment Year 2016-17.

Said employee Mr Millind, self assessed his own income and paid tax of Rs 8000/- by Challan dated 12 / 03 /2016 without consulting Govt Employer .

We (Employer) have noticed a mismatch of Rs 8000/- in our BIN (Book Identification Number) of quarterly return of month February 2016.

In this regard how to adjust the amount of Rs 8000/- paid by shri Kesarkar by challan dated 12 / 03 /2016 on our TAN deductor account ( Employer) in the name of Mr Milind; so that we can avoid short deduction fine and notice.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  SKNGOA

I am assuming, employee paid self assessment tax. Employee can claim refund at the time of filing of ITR.

Nitin Bhatia
Nitin Bhatia
8 years ago

I agree with your CA. It will be taxed as perquisite. You may opt for it.

Abhi
Abhi
8 years ago

Hello Nitin Sir,

I on behalf of my company am trying to make the salary structure of my company more beneficial

1) for Telephone exemption are bills needed to be provided for exemption (similar to medical allowance)
2) If the office does not have a dress code, can uniform allowance still be provided?
3) if my employees require to be abreast of the current situation and therefore subscribe to newspaper in their homes. Can they get an exemption for the same?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Abhi

1. Yes. It is reimbursement
2. Yes. You can define formal dressing as dress code.
3. Yes

Mithra
Mithra
8 years ago

Hi Nitin,
I have taken Health Insurance for my father in law and mother in law. Will I be able to submit this as proof under 80D.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Mithra

No. Only parents are allowed.

Karan
Karan
8 years ago

Hi Nitin! If in one of our company-client, the reimbursements are claimed by the employees while clicking the photo of the invoice which ultimately gets cleared by the clearing agency sitting abroad (after properly ascertaining if they are indeed genuine). In short, the originals are not retained by the employees.

Are the reimbursements valid in this case and not liable to tax?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Karan

A reimbursement cannot be processed. The employee should produce original bill/invoice. The amount will be taxable.

Manoj Kumar Sahu
Manoj Kumar Sahu
8 years ago

Hello Sir,
Last FY(2015-16) i have salary Income and also worked as a Subject Matter expert for which TDS was deducted u/s194J. Now my query is which ITR form should i use for my tax return ? And to save tax can i claim any expense against the Professional income(Subject mater expert) like Telephone expense/internet expense /electricity expense etc? Please guide…

Nitin Bhatia
Nitin Bhatia
8 years ago

ITR depend on various factors. If you have only salary income and charged professional fees then you may file ITR 1. You can claim expenses.

Shibu
Shibu
7 years ago
Reply to  Nitin Bhatia

“ITR depend on various factors. If you have only salary income and charged professional fees then you may file ITR 1. You can claim expenses.” How can one claim expenses (Telephone expense/internet expense /electricity expenses) while filing ITR I? I am a Professional Consultant with Insurance Ombudsman’s Office post retirement and drawing a lumpsum amount monthly.

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Shibu

It is typo error. You can file ITR 4.

Dhritiman Choudhury
Dhritiman Choudhury
8 years ago

Hi Nitin,

Greetings of the day!!

Found your suggestions & this discussion forum quite helpful. Would like to be very sure whether Retainers (Retired Employees still working) are also eligible for all these allowances & reimbursements? If yes then is there any other way these are exempted for Retainers or does it follow the same process as existing employees get? We are planning to bring in a lot of tax saving allowances & Reimbursements for them, hence your opinion is highly solicited.

Warm Regards,
Dhritiman

Nitin Bhatia
Nitin Bhatia
8 years ago

It depends whether retired employees are working as full time employees, consultants or part time employees. Secondly, it also depend on your companies retirement policy.

Dhritiman Choudhury
Dhritiman Choudhury
8 years ago
Reply to  Nitin Bhatia

Hi Nitin,
Thanks for your response.

Currently the retired employees (Retainers) are working as full time employees at various responsible positions. However, they do not have a salary structure. Only a lump sum amount is credited directly to their salary account. So, if this is possible & allowed according to the Income Tax Rules, then we would go ahead and create a structure for them too with all non-taxable components included. In this case, kindly let me know how would we provide them the Basic salary & statutory components like PF, ESIC, etc because am not sure that Retired Employees are eligible for statutory part. Also till how long we can keep the Retainers in our company as full-time employees?
Your explanations & opinion is highly valuable in this regard to our salary restructuring & bringing certain Organizational Policies.

Thanks again.

Warm Regards,
Dhritiman

Nitin Bhatia
Nitin Bhatia
8 years ago

As i shared in my previous comment that it depend on your company’s retirement policy. You have not mentioned what is the retirement age as per your company’s policy and whether these employees retired from your organization or some other organization. Lastly, whether they crossed the retirement age of your company or not.

Dhritiman Choudhury
Dhritiman Choudhury
8 years ago
Reply to  Nitin Bhatia

The Retirement Age of employees in our company is 58 as per policy. These employees have been working in our organization itself and retired from here, but they have been retained as Retainers and hence working as full time employees and get a lump sum amount without any structure. All these employees have crossed the Retirement age of our company (i.e. 58 years).

Thanks.

Warm Regards,
Dhritiman

Nitin Bhatia
Nitin Bhatia
8 years ago

In my opinion, any employee crossing the retirement age of the company cannot be hired as a FULL time employee. You can hire them as consultant. As a company you cannot offer any allowances or perquisites to them. The question of statutory components does not arise. You may land yourself in statutory compliance issue if any such employee approach labor court or any other govt authority claiming statutory benefits. On the contrary by not offering the PF to full time employee you are violating the law. Therefore, it is a double edged sword for the company.

Dhritiman Choudhury
Dhritiman Choudhury
8 years ago
Reply to  Nitin Bhatia

Hi Nitin,

Thank you so much for your valuable suggestion & opinion. I’ll discuss the same with the directors and get back to you in-case required.

Thanks again.

Warm Regards,
Dhritiman

G. K. NARULA
G. K. NARULA
8 years ago

Hello Sir, Can I claim above mentioned 11 Tax saving allowances in Income Tax Return? Warm Regards,
G.K. Narula

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  G. K. NARULA

These allowances are provided by employer. A salaried employee cannot claim these allowances at individual level.

Kiran
Kiran
8 years ago

Sir, I seek a urgent clarification from you : For year 2015-16, My Company has shown telephone reimbursement 12000/- rupees as taxable income without considering 6000/- phone bills which i have submitted to company but due to late approval by company in month of may 2016 they are saying they cant considered it as exemption for the year 2015-16 even though mobile bills are of jan16, feb 16 & march 16, can i claim this 6000/- while filing IT return. Please Help

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Kiran

In my opinion you cannot claim tax exemption against mobile reimbursement at the time of ITR filing if it was not considered by your company.

Vikas Pandey
Vikas Pandey
8 years ago

Sir,In few sites there is Rs.24000/- tax free amount is given for uniform allowance..Kindly clarify

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Vikas Pandey

The uniform allowance is decided by the company. As i mentioned in my post that newspaper/medical allowance are reimbursements. Therefore, you need to submit bills to HR/Finance to claim the same. I am not sure what is meant by education allowance.

Almost all the organizations demand bill on yearly basis even if the allowance is paid on monthly basis.

Vikas Pandey
Vikas Pandey
8 years ago
Reply to  Nitin Bhatia

thx fr the reply.It would be really helpful if you do provide more info on other allowances which constitute a salary.

regards
vikas

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Vikas Pandey

I have covered all the important allowances that can be availed by the private sector employees. Govt employees can claim upto 196 allowances and not feasible to cover the same.

Sharad Chandra Agarwal
Sharad Chandra Agarwal
8 years ago

I have submitted medical bills amounting Rs 18L to my company . but got only Rs 2.75 L as reimbursement. What to do ? how much deduction under which section is admissible ?

Nitin Bhatia
Nitin Bhatia
8 years ago

You have not mentioned whether you are public sector employee or private sector employee.

Sharad Chandra Agarwal
Sharad Chandra Agarwal
8 years ago
Reply to  Nitin Bhatia

Yes. I am in PSU. They reimbursed a small part of medical bill & then shown it as perks in Form 16 . So become taxable. Whereas they rejected reimbursement of large sum of money as per their medical policy. How to reduce this burden and what to do with not reimbursed expenses.

Nitin Bhatia
Nitin Bhatia
7 years ago

It is important to understand for rejection of 15.25L claim. It seems under the medical policy the expenses were capped or certain expenses were not allowed. Normally it happens in surgeries like bypass surgery. Therefore you can clarify the reasons for rejection.

Prima facie it seems that nothing much can be done in this case except to contest the reasons for low reimbursement provided there is enough ground to do so.

SHARAD CHANDRA AGARWAL
SHARAD CHANDRA AGARWAL
7 years ago
Reply to  Nitin Bhatia

Actually my company provides reimbursement based on AIIMS rates. No private multi speciality hospital charges are at this level. I wants to know how can I claim exemption on not reimbursed portion

Nitin Bhatia
Nitin Bhatia
7 years ago

Unfortunately you cannot claim balance amount if the amount is fixed/benchmark against AIIMS rates.

Anu
Anu
8 years ago

HI Nitin,
My company doesn’t provide Newspaper and Uniform allowances as part of flexi basket.
Can I still claim it?

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Anu

You cannot claim if it is not provided by the company.

Shibu
Shibu
7 years ago

How can one claim expenses (Telephone expense/internet expense /electricity expenses) while e-filing ITR I? I am a Professional Consultant with Insurance Ombudsman’s Office post retirement (on 31/12/2014 upon attaining 60 years of age) and drawing a lump-sum amount monthly. Have had Salary arrears too in Feb’16 (following pay revision).

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Shibu

You cannot claim under ITR 1. You can claim business expenses under ITR 4 provided you are considering yourself as a professional. Salary arrears are treated differently.

Vishaal Raj
Vishaal Raj
7 years ago

Hello Nitin,

I have a ‘Special allowance’ component on my salary slip with some lump sum amount. I have no other allowances like ‘Helper Allowance’ or ‘Uniform allowance. My query is:

1) I have no allowances like ‘Helper Allowance’ or ‘Uniform allowance’. Is this ‘Special allowance’ component be used to claim these allowances while filing ITR

2) Do you confirm that in order to claim allowances like ‘Helper Allowance’ or ‘Uniform allowance’, this needs to be specifically provided by employer as a component in salary

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Vishaal Raj

1. No
2. These allowances should be provided by the employer depending on job profile.

Vishaal Raj
Vishaal Raj
7 years ago
Reply to  Nitin Bhatia

Thank you so much Nitin..

Mohan
Mohan
7 years ago

Hello Sir, My company pays all our feild staff a fixed Non Taxable travel allowance of Rs. 7500 per month along with salary. But in form16 the total amount for 12 months 90000 does not reflect. how can we claim tax exemption for this 90000/- while filing ITR-1

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Mohan

It must be mentioned in form 12BA as a perquisite.

J.S.Raghav
J.S.Raghav
7 years ago

Sir, i am working with PSU and received Entertainment Allowance,Newspaper Allowance, Professional Body Allowance and Washing Allowance. As my company does not accept any Newspaper Bills and not have any dress code. Can i claim exemption for Newspaper Allowance and Washing Allowance.I have paid professional fees to professional institute, can i claim exemption for Professional body allowance., Please advise for Entertainement Allowance also.

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  J.S.Raghav

You cannot claim any allowance that is not allowed by your employer.

Ashley Bing
Ashley Bing
7 years ago

Hi Nitin,
I have a special allowance of 1 lac every 6 months. The employer deducts a direct 30% on it and I receive 70K. My annual salary including the allowances is 16lac.

Ashley Bing
Ashley Bing
7 years ago
Reply to  Ashley Bing

Is this proper, Nitin?

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Ashley Bing

It seems to be a special allowance. It is as good as salary under different head. You cannot save tax on this special allowance.

mathangi
mathangi
7 years ago

Hi I would like to include Uniform allowance as a part of my company’s new pay structure. I also read many decisions on dis allowance for the uniform allowance where it is given as given for formal wear not for uniform as such. I need your views on this…

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  mathangi

If your company provide uniform allowance as a part of salary structure then only you can avail. It is at the discretion of the employer. In case your company does not provide uniform allowance as a part of salary structure then you can include/demand the same.

santosh kumar
santosh kumar
7 years ago
Reply to  mathangi

i am a retired employee of ps bank and getting pension which is taxable and i am filing
return.I want to know ,can i claim Section 10(14) – Transport Allowance of rs 19200/-
as rebate on my pension amount as the salary and pension come under the same head in IT return.please reply
santosh kumar
.

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  santosh kumar

You cannot claim transport allowance.

Kapil Kumar
Kapil Kumar
7 years ago

Hi Nitin,
My company reimburses the Telephone Bills with a capping as per grades however, still asks us to produce the hard copy of actual bills while claiming the amount. Is it really a legal requirement in India from a taxation perspective to secure and archive the hard copy bills against which the employee has claimed the telephone bill. I want to get away with this policy of submiting hard copy bills as it saves a lot of paper and other costs involved so what do you suggest will be other options to fulfill the taxation and legal requirement from a company perspective and save cost at the same time by not submitting hard copy bills.

Regards
Kapil

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Kapil Kumar

As i shared in my post that mobile or telephone allowance is a reimbursement against the actual expense. Therefore, it is mandatory to provide copy of bill to claim the exemption. The company cannot do anything in this regard as they have to submit all the submissions with income tax department.

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