Important Points that Salaried employee need to be aware about Income tax Act:
1.Old vs New: A Comparison for Different Slabs:
| Old Rates(With Exemption) | Annual Income | New Rates(Without Exemptions) |
| Nil | Upto 2.5 Lakhs | Nil |
| 5% | Rs.2.5 Lakhs to Rs.5 Lakhs | 5% |
20% | Rs.5 Lakhs to Rs.7.5 Lakhs | 10% |
| Rs.7.5 Lakhs to 10 Lakhs | 15% | |
30% | Rs.10 Lakhs to Rs.12.5 Lakhs | 20% |
| Rs.12.5 Lakhs to Rs. 15 lakhs | 25% | |
| Rs.15 Lakhs and Above | 30% |
The following Exemption are still retained in new system
Income from life insurance, agricultural income, Standard deduction on rent, Retrenchment Compensation, leave encashment on retirement, VRS proceed up to 50 Lakhs, Death Cum Retirement Benefit and Money receivable as a scholarship for education etc.
2. Deductions under Section 80CCD of Income Tax:
- If salaried employee made contribution to National pension Scheme or Atal Pension Yojana, He is eligible for deduction 10% of his salary( Basic + D.A ) or 150000 whichever is higher and
- Employer made any contribution to NPS or APY on behalf of employee the same is allowed as Deduction for Rs.(10% of ( Basic + D.A ) or 150000 )whichever is higher.
3. Income Tax Exemption for Perquisites:
- Some employers also give their employees various perquisites/facilities like Car, Mobile phones, Rent Free accommodation.
- Such perquisites are not fully tax free. A specific value of such facilities is allowed as an exemption and value of the balance facilities allowed is allowed as an exemption.
4. Exemption of Various Allowances:
- Various other allowances like Transport Allowance, Children Education Allowance are also allowed as Income Tax Exemptions to Salaried Employees but only up to a certain limit.
Some of the Allowances are exempt based on the Limit they are:
- Transport Allowance
- Children Education Allowance
- Hostel Expense Allowance
- Monthly Allowance for Personal Expense
5. HRA Exemption for Salaried Employees:
1. Many employers give House Rent Allowance (HRA) to their employees for them to reside at a good place.
2. A portion of the House Rent Allowance given by an employer to an employee is exempted from the levy of the Income Tax and Income Tax is only levied on the remaining part.
3. HRA Exemption is one of the most useful income tax exemptions for Salaried Employees as it can be easily claimed and the amount of exemption allowed is also large.
6. Leave Travel Concession:
Few points need to be adhere while claiming the benefit under this scheme-
- Only those employees will be eligible for this scheme; those haven’t already availed the tax benefit exemption during the block of Jan 2018- Dec 21.
- Employees who spend less than 3 times the fare amount will get a proportionate income tax exemption.
- Purchases have to be made within the period of 12th October, 2020 to 31st March, 2021.
- This scheme benefit is not available to an employee who has exercised an option to pay
- income tax under new income tax / concessional tax regime
7. Standard Deduction:
1. For salaried employees there exists a standard deduction of Rs.50000 the same can be deducted from the gross total income of the employee.
