Let's assume your salary (basic plus dearness allowance) after the standard deduction is Rs 10,000 per month. And you are also being paid a house rent allowance of Rs 4,000 per month.
Housing: Under the new scheme, if you are staying in a rented house paying up to Rs 4,000 per month (40 per cent of salary), you are exempted from paying tax on this amount. But if your company has provided you with accommodation, 10 per cent of your basic and dearness allowance (DA), i.e. Rs 1,000, will be added to your taxable income. If the company has provided you with a furnished apartment, 5 per cent more—which amounts to Rs 500—will be added to your taxable income. This, as opposed to the current regime where 10 per cent of the capital value of the furnishings is added to your taxable income. This makes life difficult for all concerned, since, to evade tax, the company could show a furnishing bill far lower than the actual payment.
Medical: Your medical allowance up to an amount of Rs 30,000 per annum will also now be tax-exempt provided you furnish bills showing the expenses. Earlier, the exemption was only up to Rs 10,000 per year.
