Income Tax Exemption List (Essential Guide)

Income tax exemption list means how you can save huge chunks of your savings. The Income Tax Act of India has put these exemptions to inculcate a saving habit among taxpayers in India. There are several provisions under which you can do your income tax exemption.

Income tax builds the economy of the nation. Your income tax contributes to the overall well-being of the country. Income tax also helps generate more jobs by providing increased funding to budding industries.

Over time, income tax laws and rules get altered to accommodate more people with a certain income. These rules also save people in lower-income groups from unwanted financial overheads.

Thus, new rules came into existence in the Income tax act of India. These rules set a minimum qualifying income level for you to pay tax. You might also need to secure your’s and your family’s future. It requires extra savings, and it is where the income tax exemptions come in.

There are several exemptions through which you can save your hard-earned money.

Let us know more about the same in this article.

Table of Contents

What Is Exempted from Income Tax?

You can claim the following exemptions if you are a salaried individual.

House Rent Allowance.
Leave Travel Allowance
Transport Allowance
Children Education Allowance
Exemption on Housing Loan.

House Rent Allowance: If you pay the rent actually, you can get an exemption as per the House Rent Allowance, and that will be of the following

Actual House Rent Allowance received
Actual Rent paid (minus 10% of salary)
40% of salary (50% in case of Mumbai, Chennai, Kolkata, Delhi)

Leave Travel Allowance or Leave Travel Concession: You should furnish valid proof of bills that account for expenditure during travel and leave (for official or personal reasons) to claim an exemption in this allowance.

Transport Allowance: Transport allowance is valid only for the expense you made to commute from your residence to the workplace. The maximum limit on this allowance is INR 800 per month.

Children’s Education Allowance: This allowance is for a maximum of two children. The limit of this exemption is INR 100 per child per month.

Exemption on Housing Loan: You are eligible to claim an exemption on your housing loan. The tax deduction on the interest of your loan is Rs.2,00,000. It comes under section 24. In addition, if you buy a house for the first time, you get an extra deduction of up to Rs. 1 Lakh.

These are the various exemptions you could claim while filing your income tax returns.

What Is the Tax Exemption Limit?

You can claim exemptions for a maximum limit of up to Rs.2,50,000. It is eligible if you come under HUF below 60 years and an NRI.

However, you are liable to pay an additional 4% Health & education cess based on your tax amount.

This limit includes all your deductions under Section 80C, 80D, HRA, and other allowances. Though you are eligible for a deduction above the stipulated limit, you can claim only up to Rs.2,50,000.

What Is a Basic Exemption?

The basic exemption is the amount of your income that is not taxable. As per the income tax act of India, if your annual income is less than Rs. 2,50,000 you are not liable to pay tax. It is held if you are an Indian under 60 years of age.

So, the basic exemption for not paying tax is Rs.2.5 Lakhs. You need not file your income tax returns in such a case. However, you should file your ITR by any means as it is the legal proof of your income and financial status to the government.

Who Is Exempted from ITR Filing?

If your gross income exceeds the threshold limit, you should file your income tax returns and pay the tax. However, you need not file your ITR if you come under any of the below categories

You are below 60 years of age, and your basic exemption limit is 2,50,000.
You are between 60 and 80 years of age, and your basic exemption limit is 3,00,000.
You are 80 years and above, and your basic exemption limit is 5,00,000.

People under any of these categories are exempted from ITR filing.

How Do I Get a 100% Tax Exemption?

You are eligible to pay tax for your gross income if it is above the threshold limit. However, there are a few sections under which you can claim 100% or 50% tax exemption.

If you donate to a cause or do charity under any of the below entities,

you are eligible for a 100% tax exemption. The entities for this include

National Defence Fund,
Prime Minister’s National Relief Fund,
The National Foundation for Communal Harmony,
National/State Blood Transfusion Council, etc.

You can claim 100% exemption under these categories without any maximum limit. It comes under Section 80G of the income tax act of India.

You can claim a 50% deduction if you donate towards,

Prime Minister’s Drought Relief Fund,
National Children’s Fund,
Indira Gandhi Memorial Fund, etc

Thus, under Section 80G, you can claim a 100% deduction towards your charity amount.

FAQs: Income Tax Exemption List

Can I get a tax exemption for life insurance?

Yes, income from a life insurance policy is free from tax. It comes under section 10 of the income tax act of India. According to this section, every income from a life insurance policy either maturity or death is exempted from tax.

How many exemptions can I claim?

There is no limit to the number of exemptions you claim. However, the total limit of your exemptions cannot exceed Rs.2.5 Lakhs. Hence, you can claim as many exemptions as you are eligible for but under the threshold limit of Rs.2,50,000.

What is the maximum exemption in income tax?

The maximum exemption in the income tax is eligible for super senior citizens (People above 80 years of age). They have a maximum exemption of up to Rs.5 Lakhs.

How much of your income is tax-free in India?

The basic exemption limit is Rs 2.5 lakh under the old tax regime. Under the new tax regime, the basic income exemption limit has become Rs 3 lakh in FY 2023-24 from Rs 2.5 lakh till FY 2022-23. However, the new tax regime does not offer any deductions, and exemptions limits are based on age.

Are you eligible for a tax rebate under section 87A if your total income exceeds INR 5 lakh?

No, if your income exceeds INR 5 lakh, you are not eligible for the tax rebate under section 87A.

Bottomline

You might be aware of the various exemptions available from the Income Tax Exemption List. Leverage these benefits from the income tax department and save your hard-earned money. It helps to build your saving habit which is the most required habit now. Choose the exemptions you are eligible for and claim them while filing your returns. Let us know in case of any doubts.