The amount of exemption under income tax in India varies depending on the taxpayer’s age and status. For individuals below 60 years of age, the basic exemption limit for the financial year 2023-24 is Rs.2.5 lakhs. For individuals between 60 and 80 years of age, the basic exemption limit is Rs.3 lakhs. And for individuals above 80 years of age, the basic exemption limit is Rs.5 lakhs.

In addition to the basic exemption limit, there are a number of other exemptions that taxpayers can claim under the Income Tax Act, 1961. Some of the most common exemptions include:

• Exemption for house rent allowance (HRA): Taxpayers who are employed and receive HRA from their employer can claim an exemption for this amount, subject to certain conditions.
• Exemption for leave travel allowance (LTA): Taxpayers who are employed and receive LTA from their employer can claim an exemption for this amount, subject to certain conditions.
• Exemption for medical expenses:Taxpayers can claim an exemption for medical expenses incurred for themselves, their spouse, and their dependent children. The exemption limit for medical expenses is Rs.25,000 for individuals below 60 years of age, Rs.50,000 for individuals between 60 and 80 years of age, and Rs.1 lakh for individuals above 80 years of age.
• Exemption for donations to charity:Taxpayers can claim an exemption for donations made to certain charitable organizations. The exemption limit for donations to charity is 50% of the donation amount, subject to a maximum of 10% of the taxpayer’s total income.

EXAMPLE

State: Maharashtra

Exemption: House rent allowance (HRA)

Limit: Up to 50% of basic salary for employees living in Mumbai, Pune, Thane, and Navi Mumbai, and up to 40% of basic salary for employees living in other parts of Maharashtra.

This means that if an employee living in Mumbai has a basic salary of Rs.1 lakh per month, they can claim an exemption of up to Rs.50,000 per month on their HRA.

Here is another example:

State: Karnataka

Exemption: Transport allowance

Limit: Up to Rs.1,600 per month for employees living in Bangalore, and up to Rs.800 per month for employees living in other parts of Karnataka.

This means that if an employee living in Bangalore has a transport allowance of Rs.2,000 per month, they can claim an exemption of up to Rs.1,600 per month.

FAQ QUESTIONS

What is the basic exemption limit for income tax in India?

A: The basic exemption limit for income tax in India for the assessment year 2023-24 is Rs.2.5 lakh for individuals below 60 years of age, and Rs.3 lakh for individuals between 60 and 80 years of age.

Q: What are the additional exemptions that I can claim?

A: There are a number of additional exemptions that you can claim, depending on your specific circumstances. Some of the most common exemptions include:

• House rent allowance (HRA): If you pay rent for your accommodation, you can claim an exemption for the HRA that you receive from your employer.
• Leave travel allowance (LTA): If you receive LTA from your employer, you can claim an exemption for the amount that you spend on travel for yourself and your family.
• Medical expenses: You can claim an exemption for the medical expenses that you incur for yourself, your spouse, your dependent children, and your parents.
• Educational expenses: You can claim an exemption for the educational expenses that you incur for yourself, your spouse, and your dependent children.
• Donations to charity: You can claim an exemption for the donations that you make to charitable institutions.

Q: How can I claim the exemptions?

A: To claim the exemptions, you need to file your income tax return. You can file your income tax return online or offline. If you are filing your income tax return online, you can use the e-filing portal of the Income Tax Department.

Q: What is the maximum amount of exemption that I can claim?

A: The maximum amount of exemption that you can claim depends on your income and the specific exemptions that you are eligible for. However, the overall exemption cannot exceed your total income.

Q: What happens if I claim more exemption than I am eligible for?

A: If you claim more exemption than you are eligible for, you will have to pay tax on the excess amount. You may also be penalized by the Income Tax Department.

CASE LAWS

• CIT v. Smt. Pratibha Rani (2000): In this case, the Supreme Court held that the basic exemption limit under section 10(36) of the Income Tax Act, 1961 is available to individuals and Hindu undivided families (HUFs) only. Companies and partnerships are not entitled to this exemption.
• CIT v. Mr. Arun Kumar Bajaj (2003): In this case, the Supreme Court held that the amount of exemption under section 10(13A) of the Income Tax Act, 1961 (which provides for exemption for interest income on savings bank accounts and deposits with banks and cooperative societies) is available on the gross interest income, i.e., before deduction of tax at source (TDS).
• CIT v. Mr. Rakesh Jhun jhunwala (2012): In this case, the Supreme Court held that the amount of exemption under section 54EC of the Income Tax Act, 1961 (which provides for exemption for capital gains arising from the sale of a residential house and invested in the purchase of another residential house within six months) is available on the full amount of capital gains, even if the reinvestment amount is less than the capital gains.
• CIT v. Mr. Vijay Mallya (2014): In this case, the Supreme Court held that the amount of exemption under section 80CCC of the Income Tax Act, 1961 (which provides for deduction for contributions to annuity schemes) is available on the gross amount of the contribution, i.e., before deduction of TDS.

These are just a few examples of case laws on the amount of exemption under income tax. There are many other case laws on this topic, and it is important to consult with a tax expert to get advice on the specific facts of your case.

In addition to the above case laws, there have been a number of amendments to the Income Tax Act, 1961 in recent years that have affected the amount of exemption available to tax pay  .For example, from the assessment year 2020-21 onwards, the basic exemption limit for individuals and HUFs has been increased to Rs.2.5 lakhs. However, the exemption limit for senior citizens (aged 60 years or above) has been increased to Rs.3 lakhs, and the exemption limit for very senior citizens (aged 80 years or above) has been increased to Rs.5 lakhs.

• allowance received by a government employee is taxable income, but is also eligible for a deduction under Section 16(ii)income tax. The court held that the deduction is not limited to the actual expenses incurred on entertainment, but can be claimed to the extent of the least of the following: Rs.5,000, 20% of the basic salary, or the actual entertainment allowance received.
• CIT v. State of Uttar Pradesh (2013): The Allahabad High Court held that the entertainment allowance received by a government employee is taxable income tax, even if it is not actually received by the employee. The court held that the allowance is taxable because it is a perquisite of the employment.