A beginner's guide to understanding income tax exemptions in India
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A Beginner's Guide to Understanding Income Tax Exemptions in India

Fri Apr 07 2023

Income tax has always been one topic that has been under discussion forever, and it is because salaried people are a significant population of taxpayers in India. Even though Income tax is about tax deductions on your gross income, there are certain exemptions in the form of allowances and other tax deduction benefits that one can get and save on their taxes.

In this article, let's figure out the various tax exemptions available for Indian citizens.

What is an Exempt Income?

Any income that a taxpayer earns that is not subject to tax is known as exempt income. It is by section 10 of the Indian Income tax act, 1961, that certain types of income, provided they meet the guidelines, will be exempted from Income tax of that financial year. Mentioned below are some of the tax exemptions you can get.

Different Tax Exemptions

Listed below are some of the most common tax exemptions and things that you should know about them:


HRA, or house rent allowance, is offered to a salaried person who doesn't have accommodation and stays on a rented arrangement, and it is either totally or partially exempted. If you cannot show proof of rent receipts to the employer, you can still claim an exemption.  

Standard Deductions

As per the budget, a salaried person can avail of standard deductions of Rs. 50,000 under the old and new tax regime for FY 2023-24.


Leave travel allowance is given to salaried employees for traveling expenses during their leave period. LTA excludes the costs and expenses incurred during shopping, food, leisure, and entertainment. Moreover, only domestic travel is covered and not international in case of an LTA. You must show travel proof of either rail or flights.

Phone Bills

Under the Income tax, the taxpayer can claim a tax-free reimbursement of the phone bills. The amount for refund is generally mentioned in the salary package, and an individual can either claim the bill amount or the reimbursement amount (mentioned in the salary), whichever is lower.


Employees can also take tax-free claims on the books, newspapers, journals, or periodicals purchased, like phone bills. They can claim for the actual amount or the one mentioned in the salary package (whichever will be lower).

Food Coupons

Most employers provide their employees with food coupons such as Sodexo that are taxable per the prerequisite of the employee. But these meal coupons are tax-exempt, up to Rs—50 per meal. So, an employee can get an exemption of Rs. 2200 per month, based on two meal coupons for 22 working days.

Relocation Allowance

There can be instances where your company may ask you to relocate to a different place or city for a business reason. In such scenarios, the employer will pay the relocation allowance. Some of the things that are covered under relocation allowance are:

  • Transportation cost
  • Vehicle registration charges
  • Packaging cost
  • Accommodation till there is a place to stay.
  • Flight or train tickets

In the above case, if any reimbursement is given, it will be tax exempted.

Children Allowance

A children's allowance of Rs.100 per month, making up to Rs. 1200 a year, can be claimed by an employee if the employer has an education allowance as a part of the salary. You can claim for two children, Rs. 1200 each.

Different Tax Deductions

Besides the allowances mentioned above, an employee also gets some tax deduction provisions on income tax. Some of these are:

  • Life insurance premiums
  • ELSS
  • EPF
  • Pension schemes
  • Principal payment on housing loans
  • Children's tuition fee
  • Sukanya samridhi yojana
  • NSC
  • FDs
  • Post office deposits
  • National pension scheme


Paying taxes on your hard-earned money can be challenging and overwhelming. Therefore, the government has the provision of tax exemption and deductions through which the taxpayers can save on paying tax on their gross annual income. 

But remember, you will have to submit the proof to claim those exemptions. You can request the refund when you file your income tax returns if, for any reason, you cannot provide your employer with those proofs.

byKiruthika AS

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