Page 28 - Banking Finance February 2018

ARTICLE

Most salaried employees carry less than half of their salary availing HRA, one should keep in mind that it is taxable.
as take home pay and live with the nightmare of how to If one is paying rent, one should endeavour to get
save income tax. deduction of HRA from income to the extent it is
exempted under section 10(13A) and rule 2A.The least
The first thing they look for in the Union budget report of the following three is exempted in this regard.
every year is new benefits with regard to income tax; Y Actual HRA given by the employer
whether their tax outgo will increase or decrease. Though
Y 50% of the salary if the rented house is situated in
tax rules are not in our hands, there are a few judicious ways Delhi, Mumbai, Kolkata and Chennai. Else, 40% of
within the ambit of the law to save income tax. Here are a the salary.
few tips given with regard to tax management for salaried
Y Actual house rent paid, minus 10% of salary.
employees.
Important:
1. Relief under section 89 for arrears received: Any i. Exemption is allowed even if rent is paid to close
portion of salary received in arrears or in advance relative like wife, father, mother etc.
[Subject to certain conditions and circumstances] can ii. Salary here means Basic Pay plus specific
be bifurcated among the respective years to which they commission plus Dearness Allowance (if it is part of
actually belong, to claim relief under section 89. It is salary for computing all retirement benefits).
beneficial for those who have received arrears
pertaining to a year when they were under a lower tax 3. Medical Expenses: We are aware that reimbursement
rate slab in comparison to year in which it is actually of medical treatment by employer is exempted to the
received. To claim such relief, filing of form 10E is extent of Rs 15000 per year. In this regard, one should
mandatory. keep in mind that following are also exempted over and
above Rs 15000.
2. House Rent Allowance: One should prefer to avail Y Medical facility provided by employer in a hospital/
residential quarter facility / leased house facility clinic/dispensary maintained by employer.
provided by employer rather than availing HRA (house
Y Medical facility availed in a hospital/clinic/
rent allowance) as a part of salary. However, if one is
dispensary maintained by Government / local
authority or in a hospital approved by Government
for its employees.
Y Medical facility availed in a hospital/clinic/
dispensary approved by the Chief Commissioner of
Income Tax for treatment of prescribed diseases or
ailments.
Y Group medical insurance obtained by employer for
its employees or reimbursement of medical
insurance premium
Important:
Fixed medical allowance is fully taxable, hence
employees should insist on medical reimbursement
instead of fixed medical allowance.

4. Deduction under section 80 C: Maximum Rs 1.50 lakhs
can be availed under this section. There is a long list of
items which come under this section. We narrate a few
most beneficial for salaried employees.

28 | 2018 | FEBRUARY | BANKING FINANCE

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