Question

Give an account of exempted income of employee​

Answer 1

The contribution deducted from the employee's account is exempted from tax up to Rs 1.5 lakh. This deduction ..

Answer 2

Answer:

1. Employees' Provident Fund (EPF)

As per the EPF Act, 12 percent of an employee's basic salary and dearness allowance has to be invested in EPF and the employer needs to invest an equal sum. The contribution deducted from the employee's account is exempted from tax up to Rs 1.5 lakh. This deduction is provided under section 80C of the income tax Act. The interest earned on EPF is also tax-exempt, subject to certain conditions

2. Leave Travel Allowance (LTA)

An employer provides LTA to employees to help them meet travel expenses incurred for travel with family to any place in India. Archit Gupta, CEO, Cleartax said that exemption from tax is only for an amount equal to the cost of travelling the shortest distance to the destination whether by air, rail or recognised public transport system. This component can be availed by an employee by submitting travel bills/tickets to his employer. "You can avail this benefit in respect of two journeys performed in a block of four calendar years. The ongoing block is the calendar year 2018-2021," he said.

3. House Rent Allowance (HRA)

This component of salary helps take care of rent paid by an employee for the premises in which he lives. To be able to claim this deduction, it is essential that it forms a part of one's salary. Amount paid as HRA can be claimed as tax exempt, subject to certain limits, terms and conditions.

The lowest of the following amounts will be tax-exempt:

Actual HRA received;

Rent paid in excess of 10 percent of salary plus dearness allowance;

50 percent of salary plus dearness allowance in case of a house located in metro cities (Mumbai, Kolkata, Delhi or Chennai); 40 percent of salary plus dearness allowance in case the house is located in non-metro cities.

The tax benefit is available to the person only for the period in which the rented house is occupied.

Explanation:

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