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Thursday, February 03, 2011

Inflation impact: Govt may hike tax exemption limit

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Inflation impact: Govt may hike tax exemption limit

New Delhi, Feb 1 (PTI) Tax payers can expect some relief from high inflation in Budget 2011-12 as the government may raise the income tax exemption limit for individuals.

"Finance Minister Pranab Mukherjee is alive to the price situation and its impact on the common man," sources said, adding he would favourably consider the issue of hiking tax exemption limit.

Moreover, they said, as the government is committed to raise the income tax exemption limit from Rs 1.6 lakh per annum to Rs 2 lakh in line with the Direct Taxes Code (DTC) in 2012-13, tax payers could expect at least some relief in the upcoming Budget on February 28.

"The finance ministry would keep in mind the high inflation in the Budget. Since there is no dearness allowance for a vast section of the society, hike in income tax exemption limit is likely," a source told PTI.

Source: PTI

How to calculate the Income Tax exemption on House Rent Allowance...

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House Rent Allowance on Income Tax :-

How to calculate the Income Tax exemption on House Rent Allowance...

If an employee is living in a rented house, exemption is allowed to the extent of the least of the following...
Actual House Rent Allowance received from your employer
Actual House Rent paid excess of 10% of salary
50% of basic salary, if residence is in a metro or 40% of salary in non-metros.

For example :
If an employee is getting pay of Rs.15,000 pm, and HRA is 4,500. He is paying rent as Rs.2,500
calculation of amount of House Rent Allowance admissible for imcome tax exemption will be...

1. HRA received (12 x 4,500 = 54,000) : 54,000

2. Rent paid in excess of 10% (30,000 - 18,000) : 12,000

3. 50% of salary : 90,000

Out of the total of House Rent Allowance of Rs.54,000 received, Rs.12,000 which is the lease of the three items is admissible for income tax exemption. So the balance of Rs.42,000 will be include under income.

Source: cgnews

Related Post: How much of your HRA is Income tax exemption..?

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