Income Tax Return on salary: From life insurance policy, medical allowances to ex-gratia; your exemption problems solved

Nov 30, 2018, 10:57 AM IST
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Income Tax Return on salary: Paying tax on your hard earned money is a pain and to avoid this pain, the government has allowed taxpayers to claim some exemptions as per certain rules and regulations. To claim these income tax exemptions, you must be aware of these rules as otherwise you may pay too much tax or even too less tax and that will mean big trouble for you from the taxman. Below are five of the frequently asked tax queries related to insurance policies, medical allowance, and transport allowance among others:

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Income Tax Return: Life Insurance Exemption

Income Tax Return: Life Insurance Exemption

1. Are receipts from life insurance policies on maturity along with bonus taxable?
Ans: Income Tax Return: As per section 10(10D), any amount received under a life insurance policy, including bonus is exempt from tax. However, following receipts would be subject to tax: (i) Any sum received under sub-section (3) of section 80DD; or (ii) Any sum received under Keyman insurance policy; or (iii) Any sum received in respect of policies issued on or after April 1st, 2003, in respect of which the amount of premium paid on such policy in any financial year exceeds 20% (10% in respect of policy taken on or after 1st April, 2012) of the actual capital sum assured; or (iv) Any sum received for insurance on life of specified person (issued on or after April 1st 2013) in respect of which the amount of premium exceeds 15% of the actual capital sum assured.

Following points should be noted in this regard: (i) Exemption is available only in respect of amount received from life insurance policy. (ii) Exemption under section 10(10D)? is unconditionally available in respect of sum received for a policy which is issued on or before March 31, 2003. (iii) Amount received on the death of the person will continue to be exempt without any condition. (Image: Pixabay)

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Income Tax Return: Taxability of Fixed Medical allowance

Income Tax Return: Taxability of Fixed Medical allowance

2. What is the taxability of Fixed Medical allowance?

Ans: Income Tax Return: Medical allowance is a fixed allowance paid to the employees of a company on a monthly basis, irrespective of whether they submit the bills to substantiate the expenditure or not. It is fully taxable in the hands of employee. (Image: Reuters)

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Income Tax Return: Taxability of Conveyance allowance

Income Tax Return: Taxability of Conveyance allowance

3. What is the taxability of Conveyance allowance?

Ans: Income Tax Return: As per section 10(14), with Rule 2BB Conveyance allowance is exempt to the extent of amount received or amount spent, whichever is less. For e.g., If amount received is Rs. 100 and amount spent is Rs. 80, then only Rs. 20 is taxable. However, if amount actually spent is Rs 100; then nothing is taxable. (Image: Reuters)

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Income Tax Return: Transport Allowance

Income Tax Return: Transport Allowance

4. Is transport allowance can be claimed as exemption by an employee from A.Y 2019-20 onwards?

Ans: Income Tax Return: Exemption of transport allowance of Rs. 1600 p.m granted to an employee is discontinued from A.Y 2019-20. However, exemption of transport allowance of Rs. 3200 p.m granted to an employee who is blind or deaf and dumb or orthopaedically handicapped is still available. (Image: Pixabay)

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Income Tax Return: Taxability of Ex-gratia

Income Tax Return: Taxability of Ex-gratia

5. What is the taxability of ex-gratia received from employer?

Ans: Income Tax Return: If a person or his heir receives ex-gratia from Central govt/state govt/ local authority/Public Sector Undertaking due to injury to the person/death while on duty such ex-gratia payment will not be taxable. (Image: Pixabay)

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