Deduction from Salary in India

The tax system in India is categorized as moderate. Income tax is fixed at a progressive percentage based on salary amount, with the top rate being 30%. Employers must withhold tax compulsorily, if income exceeds minimum exemption limit, as Tax Deducted at Source (TDS), and provide their employees with a Form 16, which shows the tax deductions and net paid income. In addition, the Form 16 will contain any other deductions provided from salary such as:
Medical reimbursement: Up to Rs. 15,000 per year is tax free if supported by bills. (Company pays Fringe Benefit Tax on this amount)

Conveyance allowance: Up to Rs. 800 per month (Rs. 9,600 per year) is tax free if provided as conveyance allowance. No bills are required for this amount.

Professional taxes: Most states tax employment on a per-professional basis, usually a constant amount based on gross income. Such taxes paid are deductible from income tax.
House rent allowance: the least of the following is available as deduction.
 

1. Actual HRA received
2. 50%/40% (metro/nonmetro) of salary
3. Rent paid minus 10% of salary (Salary for this purpose is basic+ DA forming part+commission on sale on fixed rate)

Income from salary is net of all the above deductions.