Page 100 - DCOM301_INCOME_TAX_LAWS_I

Unit 4: Exemptions and Deductions - I

(a) The employee has rendered continuous service with his employer for a period of Notes
5 years or more; or
(b) Where he has not rendered such continuous service, the service has been terminated
by reason of employee’s ill-health or by the contraction or discontinuance of the
employer’s business or by any other cause beyond the control of the employee; or

(c) On cessation of his employment he obtains employment with any other employer
and the balance standing in his Recognised Provident Fund is transferred to his
account in a Recognised Provident Fund maintained by the new employer.
Where the accumulated balance of the fund has been transferred to any other such fund,
then in computing the period of continuous service for clause (i) or clause (ii) the period or
periods for which such employee rendered continuous service under his former employer
or employers shall be included.

20. Payment from an approved superannuation fund [section 10(13)]: Any payment from an
approved superannuation fund made:
(a) on the death of the beneficiary; or

(b) to an employee in lieu of or in commutation of an annuity on his retirement at or
after a specified age or on his becoming incapacitated prior to such retirement; or
(c) by way of refund of contributions on the death of the beneficiary; or

(d) by way of refund of contributions to an employee on his leaving the service in
connection with which the fund is established otherwise than by retirement at or
after a specified age or at his becoming incapacitated from service prior to such
retirement to the extent to which such payment does not exceed the contributions
made prior to the commencement of this Act, i.e., 1.4.1962, and also any interest
thereon, would be wholly exempt from tax.
21. House Rent Allowance (HRA) [Section 10(13a)]: Any special allowance specifically granted
to an employee by his employer to meet expenditure actually incurred on payment of rent
in respect of residential accommodation occupied by the assessee, is exempt to the extent
of least of the following:
(a) Actual amount of such allowance received in respect of the relevant period; or
(b) Rent paid over 10% of salary [Rent paid – 10% of salary]

(c) An amount equal to one-half of the amount of salary due to the assessee in respect of
the relevant period where such accommodation is situated at Mumbai, Kolkata,
Delhi or Chennai and where such accommodation is situated at any other place,
two-fifth of the amount of salary due to the assessee in respect of the relevant
period.

!
Caution Following points should be kept in mind while providing exemption for HRA:

1. Salary = Basic Pay + D.A. (If form part of retirement benefit) + Commission (If it is
based on specific % of turnover). Thus ‘Salary’ includes Basic pay, dearness allowance,
if the terms allow, includes commission, but excludes all other allowances and
perquisites.
2. ‘Relevant period’ means the periods during which the said accommodation was
occupied by the assessee during the previous year.

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