Top Income Tax Exemptions

If you're a salaried employee, you have access to several powerful tax exemptions and deductions that can help reduce your taxable income significantly — but only if you opt for the Old Tax Regime.

This post clearly categorizes:

• ✅ Exemptions available only to salaried employees

• 🟢 General exemptions available to all taxpayers

• 💸 Popular deductions under Section 80

✅ I. Exemptions Available Only to Salaried Employees

These benefits are directly linked to salary components or employment-based benefits and are not available to business owners or freelancers.

1. House Rent Allowance (HRA) – Section 10(13A)

Exemption is based on:

• Actual HRA received

• Rent paid minus 10% of salary

• 50% (metro cities) or 40% (non-metro) of salary

  Least of the above is exempt.

2. Leave Travel Allowance (LTA) – Section 10(5)

• For travel within India by employee and family

• Allowed for 2 journeys in a block of 4 years

  Only actual fare is exempt

3. Standard Deduction – ₹50,000

Flat deduction for salaried individuals and pensioners.

Budget 2024 increased it to ₹75,000 for those opting for the New Tax Regime.

4. Gratuity – Section 10(10)

• Applicable to employees with 5+ years of service

• Exemption up to ₹20 lakh on retirement/resignation/death

5. Voluntary Retirement – Section 10(10C)

• One-time exemption up to ₹5 lakh under an approved VRS scheme

• Applies only to employees of companies, local authorities, and institutions

6. Provident Fund (PF) Interest – Section 10(11)/(12)

• Interest on employee PF contribution up to ₹2.5 lakh/year is tax-free

• If there is no employer contribution, the limit increases to ₹5 lakh

🟢 II. Exemptions Available to All Taxpayers

These exemptions are not specific to salary and can be claimed by any eligible taxpayer, including professionals and business owners:

1. Life Insurance Maturity – Section 10(10D)

• Tax-free if premium is ≤10% of sum assured (post-April 2012 policies)

• New restrictions apply for high-value policies issued after April 1, 2023

2. Scholarship for Education – Section 10(16)

• Fully exempt if used to meet educational expenses

3. Agricultural Income – Section 10(1)

• Fully exempt if income is from agricultural land within India

💸 III. Deductions Under Chapter VI-A (Section 80 Series)

These deductions are from gross total income and are widely used by salaried individuals:

1. Section 80C – Up to ₹1,50,000

Eligible investments/payments include:

• Life insurance premiums

• Employee Provident Fund (EPF)

• Public Provident Fund (PPF)

• 5-year tax-saving FDs or NSCs

• ELSS mutual funds

• Tuition fees (up to 2 children)

• Principal repayment of home loan

2. Section 80CCD(1B) – ₹50,000

• Additional deduction for National Pension Scheme (NPS)

• Over and above ₹1.5 lakh under 80C

3. Section 80D – Medical Insurance

• ₹25,000 for self/family

• ₹50,000 for senior citizen parents

• Total possible: ₹75,000

4. Section 80E – Education Loan Interest

• No upper limit

• Deduction available for 8 years from the start of repayment

5. Section 80G – Donations

• Donations to eligible trusts and funds qualify for 50% or 100% deduction

6. Section 80U / 80DD / 80DDB – Disability or Illness

• Deduction from ₹75,000 to ₹1,25,000 based on the medical condition and dependent status

🏠 Bonus: Home Loan Interest – Section 24(b)

• Up to ₹2,00,000 deduction on interest paid for self-occupied housing loan

• In addition to ₹1.5 lakh under Section 80C for principal repayment

• Pre-construction interest can be claimed in 5 equal installments

📊 At a Glance: Major Tax Benefits for Salaried Employees

Section	Type	Eligible For	Max Deduction
HRA (10(13A))	Exemption	Salaried Only	Based on salary/rent
LTA (10(5))	Exemption	Salaried Only	Actual fare
Standard Deduction	Deduction	Salaried/Pensioners	₹50,000
Gratuity (10(10))	Exemption	Salaried Only	₹20,00,000
VRS (10(10C))	Exemption	Salaried Only	₹5,00,000
Section 80C	Deduction	All taxpayers	₹1,50,000
Section 80CCD(1B)	Deduction	All taxpayers	₹50,000
Section 80D	Deduction	All taxpayers	₹25k–₹75k
Section 24(b)	Deduction	All taxpayers	₹2,00,000
PF Interest (10(11)/(12))	Exemption	All taxpayers (employees)	₹2.5–5 lakh

🤔 Should You Choose Old or New Regime?

• Old Regime = Higher deductions, ideal if you claim HRA, insurance, investments

• New Regime = Lower tax rates, but most exemptions/deductions not available

• From Budget 2024 onwards, standard deduction ₹75,000 is allowed under New Regime too

✅ Compare both before filing your return.

👩‍⚕️ A Final Tip

Just like for your physical health, you visit a doctor —for your financial health, consult a Chartered Accountant.

A CA can help you:

• Maximize your tax benefits

• Choose the right tax regime

• Plan investments smartly

• Avoid mistakes and notices