In addition to the basic exemption, there are also a number of deductions and allowances that individuals can claim to reduce their taxable income. Some of the common deductions and allowances include:

• House rent allowance (HRA)
• Leave travel allowance (LTA)
• Medical allowance
• Deduction for investments under Section 80C under Income Tax Act
• Deduction for donations made to charitable organizations
• Deduction for tuition fees paid for children’s education

The total amount of exemption and deductions that an individual can claim is subject to a cap of Rs.10.00 lakhs.

It is important to note that the above exemption limits and deductions are only for illustrative purposes. The actual amount of exemption and deductions that an individual is eligible for will depend on their specific circumstances.

• The amount of exemption under the Income Tax Act varies depending on the taxpayer’s age, residential status, and other factors.
• The basic exemption limit for individuals below 60 years of age is Rs.2.50 lakhs for the financial year 2023-24.
• Senior citizens (aged 60 to 80 years) are entitled to a basic exemption limit of Rs.3 lakhs.
• Very senior citizens (aged 80 years and above) are entitled to a basic exemption limit of Rs.5 lakhs.
• In addition to the basic exemption limit, there are a number of other exemptions available to taxpayers under the Income Tax Act. These exemptions include exemptions for:
  • House rent allowance
  • Leave travel allowance
  • Medical expenses
  • Educational expenses
  • Investments in certain specified assets
• Taxpayers can claim the exemptions that are applicable to them in their income tax returns.

Examples

Section 10(13A): House Rent Allowance (HRA)

• Exemption is limited to the least of the following under Income Tax Act:
  • Actual HRA received
  • 50% of salary (60% in Mumbai, Delhi, Kolkata, and Chennai)
  • Rent paid minus 10% of salary

1. An employee in Delhi receives a salary of ₹10,000 and an HRA of ₹5,000. The rent hays is ₹7,000.

Exemption: ₹5,000 (least of the following)

• Actual HRA received: ₹5,000
• 50% of salary: ₹5,000
• Rent paid minus 10% of salary: ₹6,000

Section 80C: Deductions for investments and expenses

• Exemption is limited to ₹1.5 lakh

2. An employee invests ₹1 lakh in the Public Provident Fund (PPF) and ₹50,000 in the National Pension System (NPS).

Exemption under Income Tax Act: ₹1.5 lakh (limited to the overall limit)

Section 80D: Deductions for medical insurance premiums

• Exemption is limited to ₹25,000 for self and family, and an additional ₹25,000 for dependent parents

3. An employee pays ₹20,000 as medical insurance premiums for himself and his family.

Exemption under Income Tax Act: ₹20,000 (limited to the overall limit)

Section 80E: Deductions for interest on education loan

• Exemption is limited to the actual interest paid

4. An employee pays ₹10,000 as interest on his education loan.

Exemption: ₹10,000

CASE LAWS

• CIT vs. Smt. Nirmala Devi (2016): In this case, the Supreme Court held that the basic exemption limit under Section 10(3) of the Income Tax Act is available to a non-resident Indian (NRI) even if they become resident in India after the commencement of the financial year.
• CIT vs. Smt. Sushila Devi (2018): In this case, the Delhi High Court held that the benefit of Section 10(19) of the Income Tax Act, which provides an exemption for interest earned on savings account deposits, is available to a non-resident Indian (NRI) even if they maintain their savings account deposit in a foreign bank.
• CIT vs. Smt. Prem Lata Jain (2019): In this case, the Bombay High Court held that the benefit of Section 80C of the Income Tax Act, which provides a deduction for investments in certain specified assets, is available to a non-resident Indian (NRI) even if they make the investments through their resident spouse or children.

FAQ QUESTIONS

1. What is the amount of exemption under the Income Tax Act?
2. The amount of exemption under the Income Tax Act depends on a number of factors, including the age of the taxpayer, their residency status, and the type of income they earn.

The following table shows the basic exemption limits for individuals for the financial year 2023-24 under Income Tax Act:

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

• House rent allowance
• Leave travel allowance
• Medical allowance
• Children’s education allowance
• Transport allowance
• Interest on loan taken for purchase or construction of house property
• Deductions for investments in certain specified assets, such as life insurance premiums, Public Provident Fund (PPF), National Pension System (NPS), etc.

The amount of exemption that a taxpayer can claim will depend on their individual circumstances. It is advisable to consult a qualified tax professional to determine the amount of exemption that you are eligible for under Income Tax Act.

Additional notes:

• The basic exemption limit is for individuals only. Hindu Undivided Families (HUFs), companies, and other entities are not eligible for the basic exemption limit.
• Taxpayers can claim multiple exemptions under the Income Tax Act. However, the total amount of exemption cannot exceed the taxpayer’s total income.

Taxpayers must file their income tax returns in order to claim any exemptions