Personal Income Tax – Common Rules & Regulations in India

This post has some common rules and regulations of personal income tax in India. This would help you to further understand the intricacies of taxes.

Income Tax Slabs/Rates for Financial Year 2011 – 12

1. Women assesses

  • Upto Rs. 1,90,000 – Nil
  • From Rs. 1,90,001 – Rs. 5,00,000 – 10%
  • From Rs. 5,00,001 – Rs. 8,00,000 – 20%
  • Above Rs. 8,00,000 – 30%

2. Senior Citizen (60 – 79 Years)

  • Upto Rs. 2,50,000 – Nil
  • From Rs. 2,50,001 – Rs. 5,00,000 – 10%
  • From Rs. 5,00,001 – Rs. 8,00,000 – 20%
  • Above Rs. 8,00,000 – 30%

3. Very Senior Citizen (80 Years and above)

  • Upto Rs. 5,00,000 – Nil
  • From Rs. 5,00,001 – Rs. 8,00,000 – 20%
  • Above Rs. 8,00,000 – 30%

4. All other assesses

  • Upto Rs. 1,80,000 – Nil
  • From Rs. 1,80,001 – Rs. 5,00,000 – 10%
  • From Rs. 5,00,001 – Rs. 8,00,000 – 20%
  • Above Rs. 8,00,000 – 30%

HRA Exemption

Least of

  • 40% (50% for metros) of Basic + DA or
  • HRA Receive or
  • Rent paid (-)10% of Basic

Some Exempted Receipts/allowances are

  1. Medical Reimbursement (Max Rs.15000/- Per annum)
  2. L.T.A (as per Rule)
  3. Leave En-cashment/Leave Salary
  4. Vehicle Maintenance allowance
  5. Entertainment allowance
  6. Academic Allowance
  7. Uniform Allowance
  8. Children Education Allowance (Rs.100/ month per Child (Rs.300 for Hostel Expenditure) Max of 2 Children)
  9. Newspaper Allowance etc.

All incomes are fully taxable except in following cases

  1. Agricultural Income
  2. Withdrawal/Maturity received from PF, PPF, Insurance Co.
  3. Long Term Capital Gain
  4. Dividend on shares in companies
  5. Interest on Post Office & PPF A/C

Transport Allowance

Transport allowance is exempt up to Rs.800/- per month provided the person is in India during the month. For people having permanent physical disability, the exemption is Rs.1,600/- per month

Vehicle maintenance exemption

Vehicle maintenance exemption can be claimed if you use a car for travel to the workplace. In such case, exemption can be claimed for the petrol and vehicle maintenance amounts. The exemption is available to the tune of Rs.1,200/- per month if the engine capacity is less than 1600cc and Rs.1,600/- per month if the engine capacity is more than 1600cc. In case the amount includes driver’s salary, there is an additional exemption of Rs.600/- per month. When this exemption is claimed, transport allowance exemption is not available.

Medical Reimbursement

Medical bills are exempt for self and dependent family, up to Rs.15,000/- per annum

Leave Travelling Allowance – LTA

LTA is exempt to the tune of ecomony class Train/ Air /Recognized public Transport fare for the family to any destination in India, by the shortest route.

LTA can be claimed twice in a block of 4 calendar years. The current block is from 01.01.2010 to 31.12.2013. For claim, it is must to provide originals tickets etc.

Housing Loan

u/s 24 There is an Exemption for interest on housing loan.(for Self occupied Residence). If the loan was taken before Apr 1, 1999 exemption is limited to Rs.30,000/- per year. If the loan was taken after Apr 1, 1999 exemption is limited to Rs.1,50,000/- per year if the house is self-occupied; There is no limit if the house is rented out.

This exemption is available on accrual basis, which means if interest has accrued, you can claim exemption, irrespective of whether you’ve paid it or not.

If you have rented out your house, enter the total income/loss from the house (after deducting property tax and standard maintenance expenses).

Medical Insurance

u/s 80D Medical Insurance (such as Mediclaim & Critical illness Cover) premium is exempt upto Rs.15,000/- (for 2011-12) per year. If the premium includes that for a dependent who is above 65 years of age, an extra Rs.5000/- can be claimed ( for 2011-12 ) per year.

Handicapped Dependents

u/s 80DD Deduction in respect of medical treatment of handicapped dependents is limited to Rs.50,000/- per year if the disability is less than 80% and Rs.75,000/- per year if the disability is more than 80%

Medical Treatment

80DDB Deduction in respect of medical treatment for specified ailments or diseases for the assesse or dependent can be claimed upto Rs.40,000/- per year. If the person being treated is a senior citizen, the exemption can go up to Rs.60,000/-

Education Loan

u/s 80E Interest repayment on education loan (taken for higher education from a university of self & dependents) is completely tax exempt.


u/s 80G Donations given for certain charities are tax exempt. Some are exempt to the tune of 50%, whereas others are 100%.

Rented House Exemption

u/s 80GG If you do not get HRA, but have rented a house, an exemption is available. This will be calculated as minimum of (25% of total income or rent paid – 10% of total income or Rs.24,000/- per year)

Permanent Physical Disability

u/s 80U If you have a permanent physical disability (including blindness), you can take an exemption (subject to maximum of Rs.75,000/- per year)

Investment of 1 Lakh to save income tax

u/s 80C Investments up to 1 lac in PF, VPF, PPF, Insurance Premium, Housing loan principal repayment, NSC, ELSS, etc. are deductible from the total income (there is no limit on individual items, for example 1 lac can be invested in Insurance)

Infrastructure Bonds

You can invest upto Rs. 20,000 in Infrastructure Bonds by institutions like IFCI, IDBI, LIC, L&T, etc to save on additional income tax. This is up and above of Section 80C investment above. Read more about Infrastructure bonds here.

11 thoughts on “Personal Income Tax – Common Rules & Regulations in India”

  1. I just wanted to know that i get a petrol Reimbursement/ Conveyance allowance from my employer which is Rs 2000/- per month and i do have bills with me for Petrol bills.

    so can i claim full amount ie. Rs 2000 per month or will only will be Rs 800/- per month…

  2. We are staying in Chennai and planning to buy an apartment for investment. If we buy an apartment in Chennai will be able to claim HRA till the house is constructed fully and ready for occupation. Obviously in the construction stages we will be paying the pre-EMI on which we will claim tax benefit.
    Or is it recommended to buy an apartment in some other city so that we can claim both HRA and tax benefit on house loan?

    1. You are eligible to claim tax benefit on HRA until the house is ready to move. But once the house is ready and you start claiming tax benefit on housing loan, some companies don’t agree to both tax benefits. In that case you would need to provide a proof that you are still staying on rent and you cannot shift to your new house. The reason for this could be far from workplace or any thing genuine.

      Still if company denies benefit you would need to claim it directly from Income Tax department while filing tax return.
      In summary, it would be better if you invest in some other city than Chennai if you want no hassels in claiming HRA & Home Loan Tax benefit, but if you feel Chennai is the place to invest go ahead.

Leave a Comment

Your email address will not be published. Required fields are marked *