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Income Tax Allowances for Salaried Employees

Allowance is defined as a fixed quantity of money or other substance given regularly in addition to salary for meeting specific requirements of the employees. As a general rule, all allowances are to be included in the total taxable income unless specifically exempted. Exemption in respect of following allowanes is allowable to the exent mentioned against each:

  • House Rent Allowance: Provided that expenditure on rent is actually incurred, exemption available shall be the least of the following
    • HRA received.
    • Rent paid less 10% of salary.
    • 40% of Salary (50% in case of Mumbai, Chennai, Kolkata, Delhi) Salary here means Basic + Dearness Allowance, if dearness allowance is provided by the terms of employment.
  • Leave Travel Allowance: The amount actually incurred on performance of travel on leave to any place in India by the shortest route to that place is exempt. This is subject to a maximum of the air economy fare or AC 1st Class fare (if journey is performed by mode other than air) by such route, provided that the exemption shall be available only in respect of two journeys performed in a block of 4 calendar years.
Certain allowances given by the employer to the employee are exempt u/s 10(14). All these exempt allowance are detailed in Rule 2BB of Incometax Rules and are briefly given below.
  • Under Section 10(14)(i), following allowances are exempt, subject to actual expenses incurred:
    • Allowance granted to meet cost of travel on tour or on transfer.
    • Allowance granted on tour or journey in connection with transfer to meet the daily charges incurred by the employee.
    • Allowance granted to meet conveyance expenses incurred in performance of duty, provided no free conveyance is provided.
    • Allowance granted to meet expenses incurred on a helper engaged for performance of official duty.
    • Academic, research or training allowance granted in educational or research institutions.
    • Allowance granted to meet expenditure on purchase/maintenance of uniform for performance of official duty.
  • Under Section 10(14)(ii), the following allowances have been prescribed as exempt.
    • Special Compensatory Allowance for hilly areas or high altitude allowance or climate allowance: Rs.800 common for various areas of North East, Hilly areas of U.P., H.P. & J&K and Rs 7000 per month for Siachen rea of J&K and Rs.300 common for all places at a height of 1000 mts or more other than the above places.
    • Border area allowance or remote area allowance or a difficult area allowance or disturbed area allowance: Various amounts ranging from Rs.200 per month to Rs.1300 per month are exempt for various areas specified in Rule 2BB.
    • Tribal area/Schedule area/Agency area allowance available in M.P., Assam, U.P.,Karnataka, West Bengal, Bihar, Orissa, Tamilnadu, Tripura: Rs.200 per month.
    • Any allowance granted to an employee working in any transport system to meet his personal expenditure during duty performed in the course of running of such transport from one place to another place: 70% of such allowance upto a maximum of Rs.6000 per month.
    • Children education allowance: Rs.100 per month per child upto a maximum 2 children.
    • Allowance granted to meet hostel expenditure on employee’s child: Rs.300 per month per child upto a maximum two children.
    • Compensatory field area allowance available in various areas of Arunachal Pradesh, Manipur Sikkim, Nagaland,H.P., U.P. & J&K: Rs.2600 per month.
    • Compensatory modified field area allowance available in specified areas of Punjab, Rajsthan, Haryana, U.P., J&K, H.P., West Bengal & North East: Rs.1000 per month
    • Counter insurgency allowance to members of Armed Forces: Rs.3900 Per month
    • Transport Allowance granted to an employee to meet his expenditure for the purpose of commuting between the place of residence & duty: Rs.800 per month.
    • Transport allowance granted to physically disabled employee for the purpose of commuting between place of duty and residence: Rs.1600 per month.
    • Underground allowance granted to an employee working in under ground mines: Rs.800 per month.
    • Special allowance in the nature of high altitude allowance granted to members of the armed forces: Rs. 1060 p.m. (for altitude of 9000-15000 ft.) Rs.1600 p.m. (for altitude above 15000 ft.)
    • Any special allowance granted to the members of the armed forces in the nature of special compensatory highly active field area allowance: Rs. 4,200/- p.m.
    • Special allowance granted to members of armed forces in the nature of island duty allowance. (in Andaman & Nicobar & Lakshadweep Group of Islands): Rs. 3,250/- p.m.

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4 Responses

  1. Sir, Please I would like to know the government rules for physically handicapped candidates who is state government employees in Marharashtra. The information of professional & income tax facility for such this type of candidate.
    Please send me the further information please.

    Thanking you,

    (Virsen B. Ekhande)

  2. THE METHOD OF INCOME TAX PAYMENT ADOPTED IN INDIA IS BOGUS AND DOGMATIC PROCEESS TOWARDS FEEBLE OFFICIAL MEMBERS.PRESENT PROCEDURE SHOULD BE DEEMED TO BE BANNED AT ONCE.AND MY FOLLOWING SUGGESTIONS SHOULD BE IMMPLIMENTED IMMPARTIALLY.
    1)ALL INCOME DRAWING PEOPLE OF INDIA .WHETHER THEY ARE HAILS FROM PUBLIC SECTOR OR GOVT.,ARE DRAGGED AND SHOULD BE REGISTERED UNDER AS INCOME TAX PAYERS WITH STRINGENT IRON FIRE RULES.THE INDIVIDUAL TAX WILL BE ASSESSED AS PER THEIR ANNUAL GROSS INCOME .WHICH IS DECLARED WITH CERTAIN GOVT.,RULES AND REGULATIONS OF INDIA .NO BODY WILL BE SPARED.WHOM EVER SO THEY ARE.MAN HUNT HAS TO BE CONDUCTED TO CATCH THE CULPRITS FROM VIPS,IAS,IPS,POLITICAL LEADERS AND PRIVAIT BUSINESS MEN.THE ANNUAL INCOME DETAILS BELONGS TO ALL HAVE TO BE RECORDED AS N WHEN REQUIRED AND THE TAX IS CALCULATED AS PER NORMS AND PAYMENT PARTICULARS WILL BE SHOOTED TO ALL OFFICIALLY.FAILING WHICH TO PAY, FATE FINE AND IMMPRISINMENT TO INDIVIDUAL SHOULD BE SENTENCED BY ORDERED THROUGH THE SUPRIME CORT OF LAW.
    AT PRESENT ,THE INCOME TAX DUES AND BLOCK MONEY PENDING ARE ASSESSED TO BE HUNDRED CRORE CRORES APPROXIMATELY.THE TIME HAS RIPED NOW TO BELL THE CULPRITS TO CATCH THEM BY RED HANDED TO NOT MULTYPLY THE SAID FIGURE IN MULTY FOULDS DOUBLE IN NEXT COMING TOMORROW.IN THE PRESENT SOCIETY ALL ARE CORRUPT.
    THE SINCERE INDIANS ARE IN LESS PERCENTAGE BELOW O.OOOOOOOOOOO1.GOD HAS TO DO SOMETHING TO RECTIFY THE ISSUE.LET WE HOPE TO HAVE BETTER COMING SUNNY TOMORROWS.

    HARI VSRC SHARMA.,BE.C.ENGG.,CEO.,
    UCLAA.

  3. Please inform me whether tribal area allowance paid to government employees working in tribal areas of Maharashtra has exempt from income tax? If yes, under which section?
    Thanks

  4. please inform whether tribal area allowance paid to central government employees working in andhra pradesh is taxable or not? if yes, to what extent tax exemption is there.

    sincerely yours,
    sd/-
    dr. c. ravi shankara
    09347531460