Five Important Tax Exemptions for Salaried Employees

When it comes to payment of taxes, the salaried class is affected the most. Luckily, one does not need to resort to illegal methods in order to avoid paying the high amount of taxes. The government has introduced various tax-saving deductions and exemptions to the ease the tax burden of the salaried class. To claim such exemptions, a salaried employee would need to inform their employer about claiming the tax exemptions. It is important to inform the employer because the employer will compute the TDS on the balance income. Hence the Form 16 filled by the employee will reflect the reduced TDS. If you are a salaried individual, you can save taxes on grounds of the following exemptions.

Income Tax

HRA Exemption:- Most of the employers provide HRA or House rent allowance to help the employees with rent expenses. Only a portion of HRA is taxable, while the rest of the amount can be claimed as an exemption. Hence the HRA exemption is one of the simplest tax exemption for a salaried individual. You can save a considerable amount of taxes with the HRA exemption.

The above video talks about House Rent Allowance

Leave Travel Allowance Expense :- The leave travel allowance is provided by the employers for vacation and traveling expenses. The amount provided by the employees for such purposes is exempt from taxation. However, an employee can avail this exemption only for vacations in India.

The above video explains about leave travel allowance

Exemption on Encashment of Leave:- All employers provide certain number of days as paid leave to the employees. In case an employee does not avail the leaves, he/she has the option to encash the leaves. When an employee applies for encashment of leaves, the employer pays an extra amount for each day of leave. The amount received by the employee as leave encashment can be claimed as tax exemption.

Exemption from Pension:- This exemption is applicable for employees who receive pension after retirement. Generally, pension is of two types i.e. commuted and uncommuted. Under a commuted pension scheme, the entire amount of pension is paid as a lump sum to the employee at the time of retirement. In case of an uncommuted pension, the pension amount is paid in regular instalments. Irrespective of the type of pension, the amount paid by the company is exempt from tax.