As employers start asking for the proof of tax-saving investments and expenditures that are eligible for tax benefits for reassessment of your taxable salary to readjust the TDS to be levied on the salary of last three months of the financial year, you must know the changes made in income tax rules this year to declare what needs to be revealed.
1. Transport Allowance: You can’t avail the annual deduction up to Rs 19,200 anymore on account of transport allowance that was allowed till last year without any proof of actual expenditure, if any. However, annual deduction up to Rs 38,400 is allowed for an employee, who is blind or deaf and dumb or orthopedically handicapped with disability of lower extremities.
In many cases, the word ‘conveyance allowance’ is used synonymously for ‘transport allowance’. An employee, who has been granted conveyance allowance to meet the expenditure on conveyance in performance of duties of an office, may still claim deduction to the extent of expenditure incurred. Point to be noted that conveyance allowance should be granted for performing an official duty and need not be part of the employee’s CTC.
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2. Medical Reimbursement: Tax deductions up to Rs 15,000 on account of medical reimbursement, which was earlier allowed without any proof of actual expenditure, are no longer allowed to be deducted from gross salary.
3. Standard Deduction: Standard deduction of Rs 40,000 or the amount of salary, whichever is lower, has been reintroduced this year for salaried individuals. As standard deduction replaces transport allowance and medical reimbursement, the net gain will be Rs 5,800 only, which would get further lessened as the health and education cess has been hiked.
4. Health and Education Cess: The health and eduction cess, which is charged on the amount of tax payable, has been increased from last year’s figure of 3 per cent to 4 per cent this year.
5. Contribution of Govt in EPF: Good news for new private-sector employees, having salary up to Rs 15,000 per month, is that the government will contribute 12 per cent of eligible salary to employee’s provident fund (EPF) for first three years. The eligible salary includes basic pay, dearness allowance (to the extent it forms part of retirement benefits) and turnover based commission. Moreover, this contribution will not be taxable, unless you withdraw it before five years.