Tax laws

How it is treated under income tax laws

I am an employee in a private hospital. My salary is directly credited to the bank account. I also get cash for vouchers as allowances. I want to know how to manage this money given to me as compensation? Can I display it in my ITR? What is its tax treatment?

Answer: Any compensation paid by the employer to his employee to meet expenses in the performance of his duties is fully exempt, to the extent that it is spent. Thus, the allowances you receive will be taxable to the extent that they have not been spent by you. It appears that your employer treated the allowances as fully spent and did not deduct any tax from them. Form no. 16 issued by the hospital. If this has not been included in the taxable salary, you do not have to do anything for it. However, if you haven’t fully spent the allowances, you can donate the unspent portion for tax and include it in your salary income when you file your tax return. The exempt and non-exempt allowances must be shown separately in the form of an ITR. However, these details do not need to be provided if you are completing the ITR 1 form. For allowances which are not fully spent and represented by a tangible investment, you cannot claim the exemption. I would advise you to pay tax on it in such situation to avoid any complications in the future.

Balwant Jain is a tax and investment expert and can be contacted on [email protected] and @jainbalwant on Twitter

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