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Stock options

These are shares alloted to an employee by his employer either free or at a nominal price.

After Budget 2000, stock options have become a tax-efficient tool for rewarding employees of companies that are listed or are planning a listing in the near future. Till the previous fiscal, stocks options were taxed twice in the hands of an employee - first at the time of availing the option, and then while selling the underlying shares.

Budget 2000 rectified this anomaly, by making gains from stock options taxable only at the time of sale of the shares, and that too at concessional rates applicable to long-term capital gains. For listed shares, the effective rate of tax would not exceed 10 per cent (inclusive of surcharge of 10 per cent of total tax for taxable incomes between Rs.60,000 and Rs.1.5 lakh and 15 per cent of total tax for taxable incomes in excess of Rs.1.5 lakh) of the sale value.

For medical purposes

Medical reimbursement. Your medical expenses reimbursed by your employer are tax-exempt up to Rs.15,000 per year. Such payments should be a reimbursement against the production of bills or vouchers and not an allowance which you may or may not spend.

Medical insurance. Instead of reimbursing hospitalisation expenses, some employers prefer to reimburse the premium paid by you on a mediclaim policy. Reimbursement of medical insurance premiums is a tax-free perquisite without any limit, unlike a similar deduction under Section 80D which allows a maximum annual deduction of Rs.10,000.