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ITR Filing 2026 Deductions: Salaried employees can significantly reduce their taxable income by leveraging specific allowance and reimbursement limits
under the Income Tax Act. The pay package of a salaried employee may include various allowances, reimbursements, and special pay components, among these some of which are partially or fully taxable under the old and/or new tax regime. On that note, let's go through the allowance and reimbursement limits every salaried employee should know. Read more: Gold, Silver Price Today, July 14: Check 22K, 24K rates in Delhi, Mumbai, Chennai, Kolkata and Hyderabad
Income Tax Exemption Limits: Allowance and reimbursement limits every salaried employee should know
Many of these perquisites and reimbursements are exempt from tax, provided you can submit valid bills to your employer:
1. House Rent Allowance (HRA): Exempt is the minimum of (a) actual HRA received, (b) 50% of (Basic Salary + DA) for metro cities or 40% for non-metro cities, or (c) actual rent paid minus 10% of (Basic Salary + DA).
2. Standard Deduction: A flat deduction of Rs 75,000 (applicable in both old and new regimes) can be claimed against salary income.
3. Leave Travel Allowance (LTA): Exemptions apply to actual travel costs within India for you and your family. This is generally limited to two journeys in a block of four calendar years.
4. Children's Education & Hostel Allowance: Education allowance is exempt up to Rs 100 per month per child (maximum of two children). The hostel allowance is exempt up to Rs 300 per month per child (maximum of two children).
5. Meal Vouchers/Coupons: Employer-provided meal vouchers or cards used during working hours are tax-exempt up to Rs 200 per meal.
6. Telephone & Internet Reimbursement: Bills for mobile and internet connections used for official purposes are fully tax-exempt when submitted.
7. Uniform & Helper Allowance: Exempt up to the amount of actual expenditure incurred for official duties.
8. Transport Allowance: A regular transport allowance is fully taxable. However, conveyance allowance (for official travel) is exempt to the extent of actual expenditure.
9. Differently-Abled Employees: Transport allowance is exempt up to Rs 3,200 per month specifically for blind, deaf, dumb, or orthopedically handicapped employees to commute between residence and office.
10. Gratuity: Exempt up to Rs 20 lakhs for non-government employees. For government employees, the full gratuity received is tax-exempt.
11. Medical Insurance (Section 80D): Salaried taxpayers can claim a deduction for health insurance premiums paid for themselves, their spouse, children, or parents under Section 80D. The deduction limit is up to Rs 25,000 for self, spouse, and children, and Rs 50,000 for parents. An additional Rs 5,000 can be claimed for preventive health check-ups, with the maximum deduction capped at Rs 1 lakh for eligible families. The benefit is available only under the old tax regime and requires premium payment receipts.
Also read: Employees Provident Fund Organisation Updates: Can your photo stop PF claim? Here's how to change blur or old image in EPFO account
