There are certain components of salary that are fully taxable and there are certain components of allowances in Salary that are exempted from Tax.
Components of salary that are completely taxed included Basic Salary, HRA and Bonus and Commission that one receives.
1) Children Education Allowance and Tax Exemption
Children's Education Allowance is exempt up to a maximum of Rs 100 per month per child. For the purpose of exemption a maximum of two children can be taken into consideration.
2) Hostel Expenditure Allowance Exempted from Tax For Employees Child
Expenditure on the above mentioned is exempt to the extent of Rs.300 per month per child up to a maximum two children. Not a very large amount though to meet hostel expenses.
3) Any allowance that is granted for travel or company tour is also exempted from tax, if the employee us using them.
4) If no free conveyance is provided then the allowance that is granted for the purpose of travel to fulfill one's travel duties is exempt from tax.
5) If an employee conducts academic research then the allowance for the purpose of research and training at educational or research institution is exempt from tax.
6) If you have been granted an allowance to meet the expenditure that you have incurred for the purchase/ maintenance of uniform that you need for duty, such an allowance is exempt from tax.
7) If you are working in hilly areas such as the North East, Hilly areas of Uttar Pradesh or Himachal Pradesh you can claim a sum of Rs 800 as exemption per month.
8) If you are employed in the Siachen area of Jammu and Kashmir, then a sum of Rs 7000 per month can be claimed as exemption.
9) For all allowances over a height of 1000 metres above sea level an amount of Rs 300 per month can be claimed.
10) Any person working in tribal area/Schedule area/Agency area allowance available in MP, Assam, UP., Karnataka, West Bengal, Bihar, Orissa, Tamilnadu, Tripura can cliam a sum of upto Rs 200 per month.
11) If you are working underground in a mine and receiving underground allowance, then you can claim exemption up to Rs 800 per month.
12) For army personnel a Special allowance in connection with island duty in the Andaman and Nicobar Islands of Rs 3250 per month can be claimed as exemption.