At present, LTA is exempt from tax only twice during a block of four calendar years to the extent of the second class air-conditioned rail fare . Now LTA will be exempt from tax every alternate year (this does not affect the employee much, but makes life easier for the employer who now has to keep track of two years instead of four) and it will be applicable up to a maximum of economy class air fare, provided the amount is actually spent on travel.
Vehicle: If your company has given you a car for personal use, you will have pay tax on this at the rate of Re 1 per cubic capacity of the vehicle's engine. A Maruti 800 will add Rs 800 to your monthly taxable income while an Esteem will add Rs 1,300 and a Contessa Rs 2,000 to your income. If the company has also provided a chauffeur, your taxable income goes up by Rs 1,000 irrespective of how much the chauffeur is paid. However, if you are paying the chauffeur, that's free from tax.
Other Allowances: Similarly, all genuine expenses, such as conveyance, books and newspapers, entertainment and so on, will remain tax-free but the amount should not exceed a specified percentage of the salary.
Stock Options: It is likely that in the coming years, more companies will frame stock option schemes for employees. These won't be taxed till the employee exercises his stock option. That is, he will be taxed when he sells the stocks in the market or transfers them to a friend or family. The difference between the market price and the price at which he was offered the stock will then be added on to his income.
