Modified on : 6 May, 2018
Top

Taxability of Allowances

Information about exemptions available under various section of Income Tax Act & Rules on allowances to individual salaried employees.

  1. House Rent Allowance
  2. Employment Tax / Professional Tax
  3. Children Education Allowance
  4. Hostel Expenditure Allowance
  5. Transport Allowance
  6. Allowance to an transport business employee ...
  7. Conveyance Allowance
  8. Allowance to meet the cost of travel on tour / transfer
  9. Daily Allowance on account of absence from normal place of duty
  10. Helper/Assistant Allowance
  11. Research Allowance
  12. Uniform Allowance
  13. Special compensatory Allowance (Hilly Areas)
  14. Border area allowance / Remote Locality allowance / Disturbed Area allowance / Difficult Area Allowance
  15. Tribal area allowance
  16. Compensatory Field Area Allowance
  17. Compensatory Modified Area Allowance
  18. Counter Insurgency Allowance
  19. Underground Allowance
  20. High Altitude Allowance
  21. Highly active field area allowance
  22. Island Duty Allowance)
  23. Allowance or perquisite to Government employees posted outside India
  24. Salary received in arrears/in advance/profit received in lieu of salary
  25. Compensation to widow or other legal heirs
  26. Ex-gratia payment to a person (or legal heirs)
  27. Entertainment Allowance
  28. Allowances to Judges of High Court/Supreme Court
  29. Compensatory allowance to a Judge under article 222(2)
  30. Salary and allowances received by a teacher / professor from SAARC member state
  31. Allowances / perquisites to serving Chairman/Member of UPSC
  32. Allowances to Retired Chairman/Members of UPSC
  33. Allowances paid by the UNO to its employees
  34. Allowances Fully Taxable


House Rent Allowance
(Section 10(13A) & Rule 2A)
ExemptionLeast of the following is exempt:
a) Actual HRA Received
b) 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Madras) c) Rent paid minus 10% of salary
* Salary = Basic + DA (if part of retirement benefit) + Turnover based Commission
Note:
i. Fully Taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent
ii. It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than ₹ 1,00,000 [Circular No. 08 /2013 dated 10th October, 2013].
Available toIndividual - Salaried employee
Top ▲
Employment Tax / Professional Tax
(Section 16 (iii))
ExemptionAmount actually paid during the year
Available toIndividual - Salaried Employee
Top ▲
Children Education Allowance
(Section 10(14))
ExemptionUp to ₹ 100 per month per child up to a maximum of 2 children is exempt
Available toIndividual - Salaried employee
Top ▲
Hostel Expenditure Allowance
(Section 10(14))
ExemptionUp to ₹ 300 per month per child up to a maximum of 2 children is exempt
Available toIndividual - Salaried employee
Top ▲
Transport Allowance granted to an employee to meet expenditure on commuting between place of residence and place of duty
(Section 10(14))
ExemptionUp to ₹ 1,600 per month (₹ 3,200 per month for blind, deaf, dumb and handicapped employees) is exempt
Available toIndividual - Salaried employee
Top ▲
Allowance granted to an employee working in any transport business to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided employee is not in receipt of daily allowance.
(Section 10(14))
ExemptionAmount of Exemption shall be lower of following:
a) 70% of such allowance; or
b) ₹ 10,000 per month.
Available toIndividual - Salaried employee
Top ▲
Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office
(Section 10(14))
ExemptionExempt to the extent of expenditure incurred for official purposes
Available toIndividual - Salaried employee
Top ▲
Any Allowance to meet the cost of travel on tour or on transfer
(Section 10(14))
ExemptionExempt to the extent of expenditure incurred for official purposes
Available toIndividual - Salaried employee
Top ▲
Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty
(Section 10(14))
ExemptionExempt to the extent of expenditure incurred for official purposes
Available toIndividual - Salaried employee
Top ▲
Helper/Assistant Allowance
(Section 10(14))
ExemptionExempt to the extent of expenditure incurred for official purposes
Available toIndividual - Salaried employee
Top ▲
Research Allowance granted for encouraging the academic research and other professional pursuits
(Section 10(14))
ExemptionExempt to the extent of expenditure incurred for official purposes
Available toIndividual - Salaried employee
Top ▲
Uniform Allowance
(Section 10(14))
ExemptionExempt to the extent of expenditure incurred for official purposes
Available toIndividual - Salaried employee
Top ▲
Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations)
(Section 10(14))
ExemptionAmount exempt from tax varies from ₹ 300 per month to ₹ 7,000 per month.
Available toIndividual - Salaried employee
Top ▲
Border area allowance or Remote Locality allowance or Disturbed Area allowance or Difficult Area Allowance (Subject to certain conditions and locations)
(Section 10(14) & Rule 2BB)
ExemptionAmount exempt from tax varies from ₹ 200 per month to ₹ 1,300 per month.
Available toIndividual - Salaried employee
Top ▲
Tribal area allowance in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Orissa
(Section 10(14))
ExemptionUp to ₹ 200 per month
Available toIndividual - Salaried employee
Top ▲
Compensatory Field Area Allowance. If this Exemption is taken, employee cannot claim any Exemption in respect of border area allowance (Subject to certain conditions and locations)
(Section 10(14))
ExemptionUp to ₹ 2,600 per month
Available toIndividual - Salaried employee
Top ▲
Compensatory Modified Area Allowance. If this Exemption is taken, employee cannot claim any Exemption in respect of border area allowance (Subject to certain conditions and locations)
(Section 10(14))
ExemptionUp to ₹ 1,000 per month
Available toIndividual - Salaried employee
Top ▲
Counter Insurgency Allowance if this Exemption is taken, employee cannot claim any Exemption in respect of border area allowance (Subject to certain conditions and locations)
(Section 10(14))
ExemptionUp to ₹ 3,900 per month
Available toIndividual - Members of Armed Forces
Top ▲
Underground Allowance is granted to employees working in uncongenial, unnatural climate in underground mines
(Section 10(14))
ExemptionUp to ₹ 800 per month
Available toIndividual - Salaried employee
Top ▲
High Altitude Allowance is granted to armed forces operating in high altitude areas (Subject to certain conditions and locations)
(Section 10(14))
Exemption a) Up to ₹ 1,060 per month (for altitude of 9,000 to 15,000 feet)
b) Up to ₹ 1,600 per month (for altitude above 15,000 feet)
Available toIndividual - Members of Armed Forces
Top ▲
Highly active field area allowance is granted to members of armed forces (Subject to certain conditions and locations)
(Section 10(14))
ExemptionUp to ₹ 4,200 per month
Available toIndividual - Members of Armed Forces
Top ▲
Island Duty Allowance is granted to members of armed forces in Andaman and Nicobar and Lakshadweep group of Island (Subject to certain conditions and locations)
(Section 10(14))
ExemptionUp to ₹ 3,250 per month
Available toIndividual - Members of Armed Forces
Top ▲
Any allowance or perquisite paid or allowed by Government to its employees posted outside India
(Section 10(7))
ExemptionEntire Amount
Available toIndividual- Salaried Employee (being a citizen of India)
Top ▲
Any portion of salary received in arrears or in advance or profit received in lieu of salary [Subject to certain conditions and circumstances]
(Section 89)
ExemptionRelief to the extent computed in accordance with Section 89
Available toIndividual - Salaried Employee
Top ▲
Lump-sum payment made gratuitously or by way of compensation or otherwise to widow or other legal heirs of an employee who dies while still in active service [Circular No. 573, dated 21-08-1990]
ExemptionEntire amount paid in lump-sum
Available toIndividual - Widow or other legal heirs of employee.
Top ▲
Ex-gratia payment to a person (or legal heirs) by Central or State Government, Local Authority or Public Sector Undertaking consequent upon injury to the person or death of family member while on duty [Circular No. 776, dated 08-06-1999]
ExemptionEntire amount paid as ex-gratia
Available toIndividual or legal heirs.
Top ▲
Entertainment Allowance received by the Government employees (Fully taxable in case of other employees)
(Section 16 (ii))
ExemptionLeast of the following is exempt from tax:
a) Rs 5,000
b) 1/5th of salary (excluding any allowance, benefits or other perquisite)
c) Actual entertainment allowance received
Available toIndividual - Government employee
Top ▲
Allowances to Judges of High Court/Supreme Court
ExemptionExempt, subject to certain conditions.
Available toIndividual - Judges of High Court/Supreme Court
Top ▲
Compensatory allowance received by a Judge under article 222(2) of the Constitution
ExemptionFully Exempt
Available toIndividual - Judges
Top ▲
Salary and allowances received by a teacher /professor from SAARC member state (Subject to certain conditions).
ExemptionFully Exempt
Available toIndividual - Teacher from SAARC member State
Top ▲
Following allowances and perquisites given to serving Chairman/Member of UPSC is exempt from tax:
a) Value of rent free official residence
b) Value of conveyance facilities including transport allowance
c) Sumptuary allowance
d) Leave travel concession
(Section 10(45))
ExemptionFully Exempt
Available toIndividual - Chairman/Member of UPSC
Top ▲
Allowances to Retired Chairman/Members of UPSC
(Section 10(45))
ExemptionExempt subject to maximum of ₹ 14,000 per month for defraying the services of an orderly and for meeting expenses incurred towards secretarial assistant on contract basis.
Available toIndividual - Retired Chairman/Member of UPSC
Top ▲
Allowances paid by the UNO to its employees
ExemptionFully Exempt Individual - Government employee
Available toIndividual - Employees of UNO
Top ▲
Allowances Fully Taxable
  • City Compensatory Allowance
  • Fixed Medical Allowance
  • Tiffin/Lunch/Dinner/Refreshment Allowance
  • Servant Allowance
  • Dearness Allowance
  • Project Allowance
  • Overtime Allowance
  • Telephone Allowance
  • Holiday Allowance
  • Any Other Cash Allowance
Top ▲

Disclaimer

Finotax.com does not make any claim that the information provided on its pages is correct and up-to-date. The contents of this site cannot be treated or interpreted as a statement of law. In case, any loss or damage is caused to any person due to his/her treating or interpreting the contents of this site or any part thereof as correct, complete and up-to-date statement of law out of ignorance or otherwise, this site will not be liable in any manner whatsoever for such loss or damage.

The visitors may visit the web site of Income Tax Department for resolving their doubts or for clarifications.

Our Popupar Content : You may like to View / Use / Download

Tax Rates
Income Tax Slabs AY 2019-20 Income Tax Slabs AY 2018-19
Income Tax Slabs AY 2017-18 TDS Rates : AY 2019-20
Tax Calculators
Income Tax AY 2019-20 (Individual/HUF) Income Tax AY 2019-20 (Non-Individual)
Income Tax AY 2018-19 (Individual/HUF) Income Tax AY 2018-19 (Non-Individual)
Income Tax AY 2017-18 (Individual/HUF) Income Tax AY 2017-18 (Non-Individual)
Advance Tax (Non-individual) Advance Tax (Individual/HUF)
Interest u/s 234 (Non-corporates) Interest u/s 234 (Corporates)
Save Tax : AY 2019-20 TDS Calculator AY 2019-20
Taxable HRA Calculator Taxable Gratuity Calculator
Perquisite Value Calculator Indexed Cost & LTCG
LTCG on Securities AY 2019-20 STCG & LTCG : ITR format
Gold & Silver Assets Valuation Presumptive Income Calculator
Income Tax Information
Deductions: Taxable Income Taxability of Allowances
Exempt Incomes Deductions: House Property Income
Taxability of Pensioners & Sr. Citizens Taxability of Retirement Benefits
PAN & PAN Card View 26AS
SBI Lending Rates ITR mode of filing and ITR forms
Income Tax : Non-Residents
Income Tax Slabs AY 2019-20 Income Tax Slabs AY 2018-19
Income Tax Calculator AY 2019-20 Income Tax Calculator AY 2018-19
Advance Tax Calculator TDS Rates : AY 2019-20
TDS Calculator : AY 2019-20 Residential Status
PPF and SSY
PPF account - Features PPF Calculator
Sukanya Samriddhi Yojana Calculator Sukanya Samriddhi Yojana features
Fillable Forms with formulas
Income Tax forms TDS forms
PAN and TAN forms Post Office forms
RTO forms SBI forms
HDFC Bank forms ICICI Bank forms
Axis Bank forms EPF forms
NPS forms ESIC forms
KYC forms Aadhaar Enrollment Form
Vat forms for various states Trade Mark forms
Prof. Tax Rates, forms & Calculator CGAS 1988 forms
LIC forms Passport forms
Misc. Tools, Utilities and info
PO Small Savings Calculator Ramayana Prashnavali
Property Tax Delhi Calculator Bank Holidays 2018
Liberalised Remittance Scheme Forex Facilites for Residents