GENERAL RULES FOR THE FINANCIAL YEAR 2010-2011 UNDER THE INCOME TAX ACT, 1961

House Rent Allowance -Tax Benefit

An employee will be eligible to claim tax exemption for House Rent Allowance under Section 10(13A) of
the Income Tax Act, 1961, provided:

(1) The house rent allowance is a part of the employee’s salary, and, (2) The employee has actually paid
rent.

The employee is entitled to claim tax exemption least of the following:

a. House rent allowance received

b. Actual rent paid less 10% of basic salary

c. 40 %( in case of non-metro cities) or 50% (in case of metros) of basic salary i.e. Bangalore 40% /
Mumbai and Chennai 50%

Example:
X, is a resident of Bangalore and his monthly salary is:
Basic = Rs.12, 000/-
HRA = Rs. 5,000/-

- Rent Paid = Rs.5, 000/-

Calculation of Exemption:
40% of Basic Rs. 4,800/- (12,000*0.4)
Rent paid less 10% of Basic Rs. 3,800/- (5,000-0.1*12,000)
Actual HRA Rs. 5,000/-
Rs.3, 800 being least of the above amounts will be exempt from tax
Hence taxable HRA is Rs. 1,200(5000-3800)

Conveyance

• As per the Income Tax Act, 1961 a tax exemption is allowed on conveyance allowance to the extent
of Rs.800/- per month, provided the employee does not use the company’s vehicle for commuting to
and from work.

Medical reimbursement

An Employee can claim exemption for medical expenses under the Income Tax Act, 1961 upto a
maximum amount of Rs.15,000/-per annum subject to production of original bills.
Expenses incurred for self, spouse, children, parents, brothers and sisters of the individual or any of
them, wholly or mainly dependent on the individual are to be considered. Expenses for parents-in-
law are not eligible.
Bill for spectacles/ contact lens need to be supported by Doctor’s prescription. Expenses on frames will
not be permitted. Cosmetic/Provisional use items will not be considered.
All bills should be stapled firmly. Loose bills and bills without claim forms will not be considered for
exemption.

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Interest on self occupied residential property

Interest paid up to Rs.1,50,000/- is deductible from salary income.

Conditions to be satisfied for availing tax benefit: -

If Loan is taken for construction / purchase of house property before 1st April 1999 exemption can be
claimed upto Rs.30,000/- p.a. Loans taken after 1st April 1999 are eligible for a tax exemption up to
Rs. 1,50,000/- per annum.
The House construction should be complete & occupied earlier or during the F.Y 2010-11.i.e before the
submission of the documents for claiming the benefit.
o Where a person is availing the benefit of HRA, the deduction of Rs 150,000 per annum can be
claimed only when the house property is not actually occupied by the owner owing to his
employment being carried on at any other place provided the property is not actually let out
by the person during the whole or any part of the year.
Form of verification & provisional certificate from bank has to be submitted for getting this tax benefit.
In absence of Form of verification we will not be able to provide the exemptions. Signed Form of
verification is a must.
To avail the home loan benefit, employee needs to submit the bank certificate with break up of Interest
and Principal. Loan statement will not be considered for exemptions.
The Interest on a loan taken for purchase of plot / site /commercial site is not eligible for tax
exemption.
o In case of joint ownership, where the share is defined, interest claimed should not exceed the
proportionate amount of share in the ownership of the property.
After completion of house construction or purchase of house, an employee cannot avail of exemptions
for both HRA and interest loss on self occupied house property unless the self occupied house
property is in a different location from the place of work

Deductions under Chapter VI A of the Income Tax Act, 1961

Financial Year 2010-11

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 Assessment Year 2011-12

Maximum limit for

Proof to be submitted by
Section Particulars investment
employees
(Rs. per annum)
15,000 Copy of premium receipt
Premium paid on Mediclaim policy covering
issued by the Insurance Co.
employee, spouse, dependent parent, and Or
80D
dependant children. (The amount can be claimed
only when paid by A/c payee cheque) 20,000 (if senior The payment to be made by
citizen is covered) way of cheque.

The relevant Rule and

requisite Certificate form
as attached:

Income Tax Rule

11A.pdf
Expenditure incurred on maintenance/ treatment 50,000 Or
of handicapped dependant amount deposited with
LIC/UTI scheme of insurance company/UTI must be
80DD approved by CBDT. Income Tax Form10
IA.pdf

If the dependant suffering from a severe disability 1,00,000 for severe

disability (Disability
over 80%)
Certificate for
Disabilities.pdf

The relevant Rule and

requisite Certificate form
Expenditure incurred on treatment of employee or as attached:
his relative (spouse, children, parents, brother
&sister) for treatment of any of the following 40,000 or 60,000 ( For Income Tax Rule
specified diseases Senior Citizen) 11DD.pdf
80DDB
Cancer, AIDS, Chronic Renal Failure
Hemophilia Thalassaemia
Neurological diseases i.e. dementia, Chorea, Income Tax Form10
Parkinson Disease I.pdf

Repayment of interest on Loan taken for full time Copy of Certificate of

80E higher studies for self, spouse & child. The Actual interest payment from bank /
deduction is available for a maximum of 8 years. Institution

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 The relevant Rule and
requisite form as attached:
Income of blind or physically handicapped persons
(Employee who suffers 40% or more disability) is Income Tax Rule
50,000
entitled. 11A.pdf
In case he suffers from a permanent physical
(100,000 for severe
80U disability (including blindness) or is subject to
disability of 80% and
mental retardation.
above) Income Tax Form10
IA.pdf

Certificate for
Disabilities.pdf

Deduction in respect of subscription to long- 20,000 which is in Copy of the bond /

80CCF addition to Rs.100,000 certificate, demat
term infrastructure bonds limit under Sec 80C Statement

Deductions under Sec.80 C of the Income Tax Act, 1961

An employee would be entitled to claim exemption under Section 80C subject to a maximum
amount of Rs.1,00,000/- per annum

Maximum
Proof to be
Particulars qualifying limit
submitted
(Rs. Per annum)
Public provident fund (PPF) amount invested is eligible for rebate
under this section. Copy of challans and
70,000/-
passbook.

Insurance Premium rebate is available on the life insurance

premium paid by an employee, on his life, his/her spouse / life of Premium paid
1,00,000/-
any child (including adult children married / unmarried). Maximum receipt.
Benefit restricted to 20% of the sum assured.

Contribution to Pension Fund plan of LIC / HDFC Insurance / ICICI

1,00,000/- Copy of receipt
Prudential etc for receiving pension.
Repayment of principal towards housing loan repayment for the 1,00,000/- Copy of Certificate
purposes of purchase or construction of a residential house issued by the Housing
property or stamp duty, registration fee and other expenses for the Finance Co. giving
purpose of transfer of such house property to the assessee
the break-up of
principal & interest
payments.

Employee to furnish
relevant details in
Form of verification

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 to employer

Fixed Deposit of nationalized banks (approved for rebate under this

100,000/- Copy of FD receipt
section - 5 years scheme)

Max qualifying limit

Particulars Proof to be submitted
(Rs. per annum)
National savings certificate
Copy of certificate issued by post
Investments in NSC –VIII issue are also eligible 1,00,000/-
office
for rebate
Equity Linked Saving Schemes (Mutual Fund
Units)
Copy of statement issued by the
benefit of rebate shall be available even if 1,00,000/-
mutual fund company
contribution is in the name of spouse or child, to
a mutual fund recognized under section 10(23D).
Post Office Savings
Amount deposited in CTD of post office savings 1,00,000/- Copy of receipted pay-in-slip
bank scheme is eligible for exemption

Unit Linked Insurance Plan 1,00,000/- Copy of receipted pay-in-slip

1,00,000/- (For two Copy of fees paid receipt

Tuition Fees
children)

Note: The basic condition for availing exemption under Section 80C of the Income Tax Act, 1961, is that
the employee should incur/deposit/invest the said amounts during the current financial year made out
of the taxable income.

Tax Slab List: - (for Male)

Net income range Income Income Tax Surcha Education Secondary and
tax rates rge Cess higher education
cess
Upto Rs 160,000 Nil Nil Nil Nil Nil

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 Rs 160,001 – Rs 10% 10% of total Nil 2% of income 1 % of income tax
5,00,000 income minus tax
Rs. 1,60,000
Rs 5,00,001 – Rs 20% Rs. 34,000 + Nil 2% of income 1 % of income tax
8,00,000 20% of total tax
income minus
Rs. 5,00,000
Above Rs 8,00,001 30% Rs. 94,000 + Nil 2% of income 1 % of income tax
30% of total tax
income minus
Rs. 8,00,000

Tax Slab List: - (Resident Women (who is below 65 years at any time during the previous year))

Net income range Income Income Surcharge Education Secondary and

tax rates Tax Cess higher education
cess
Upto Rs 190,000 Nil Nil Nil Nil Nil
Rs 190,001 – Rs 10% 10% of Nil 2% of income 1
500,000 total tax % of income tax
income
minus Rs.
1,90,000
Rs 500,001 – Rs 20% Rs. 31,000 Nil 2% of income 1 % of income tax
8,00,000 + 20% of tax
total
income
minus Rs.
5,00,000
Above Rs 8,00,001 30% Rs. 91,000 Nil 2% of income 1% of income tax
+ 30% of tax
total
income
minus Rs.
8,00,000

Surcharge & Education Cess

• No surcharge is levied on a taxable income.
• Education Cess & Secondary and Higher Education Cess 3% on net tax payable

Filing of tax returns

Form 16 will depict the complete earnings & tax deducted & dates of payment of taxes to Government.
Employees need to file income tax returns if they have taxable incomes.
A Permanent Account Number (PAN) is compulsory for obtaining a Form 16 (TDS certificate) from
the company.
• Name and PAN Number in Form-16 will be as appearing in the Payslips. Any
Corrections should be brought to HR notice immediately. Once the Form-16 issued it
cannot be changed or corrected.

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