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Home  ❯  Tax  ❯  Info  ❯  Allowances

Taxability of Allowances

Income Tax provisions relating to Allowances payable to Salaried Employees

Information about taxability and exemptions available under various section of Income Tax Act & Income Tax Rules for allowances paid to individual salaried employees and others.

Important : Please note that the contents of this page shall be applicable only if you do not opt for Section 115BAC relating to New Tax Provisions and Tax Rates introduced by Finance Act 2020.

Section 10(13A) & Rule 2A
Exemption :Least 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 to :Individual - Salaried employee
Section 16 (iii)
Exemption :Amount actually paid during the year
Available to :Individual - Salaried Employee
Section 10(14)
Exemption :Up to ₹ 100 per month per child up to a maximum of 2 children is exempt
Available to :Individual - Salaried employee
Section 10(14)
Exemption :Up to ₹ 300 per month per child up to a maximum of 2 children is exempt
Available to :Individual - Salaried employee
* granted to an employee to meet expenditure on commuting between place of residence and place of duty
Section 10(14)
Exemption :Up to ₹ 1,600 per month (₹ 3,200 per month for blind, deaf, dumb and handicapped employees) is exempt
Available to :Individual - Salaried employee
* 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)
Exemption :Amount of Exemption shall be lower of following:
a) 70% of such allowance; or
b) ₹ 10,000 per month.
Available to :Individual - Salaried employee
* granted to meet the expenditure on conveyance in performance of duties of an office
Section 10(14)
Exemption :Exempt to the extent of expenditure incurred for official purposes
Available to :Individual - Salaried employee
* to meet the cost of travel on tour or on transfer
Section 10(14)
Exemption :Exempt to the extent of expenditure incurred for official purposes
Available to :Individual - Salaried employee
to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty
Section 10(14)
Exemption :Exempt to the extent of expenditure incurred for official purposes
Available to :Individual - Salaried employee
Section 10(14)
Exemption :Exempt to the extent of expenditure incurred for official purposes
Available to :Individual - Salaried employee
granted for encouraging the academic research and other professional pursuits
Section 10(14)
Exemption :Exempt to the extent of expenditure incurred for official purposes
Available to :Individual - Salaried employee
Section 10(14)
Exemption :Exempt to the extent of expenditure incurred for official purposes
Available to :Individual - Salaried employee
Section 10(14)
Exemption :Amount exempt from tax varies from ₹ 300 per month to ₹ 7,000 per month. (Subject to certain conditions and locations)
Available to :Individual - Salaried employee
Section 10(14) & Rule 2BB
Exemption :Amount exempt from tax varies from ₹ 200 per month to ₹ 1,300 per month. (Subject to certain conditions and locations)
Available to :Individual - Salaried employee
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)
Exemption :Up to ₹ 200 per month
Available to :Individual - Salaried employee
Section 10(14)
Exemption :Up to ₹ 2,600 per month
(Subject to certain conditions and locations. If this Exemption is taken, employee cannot claim any Exemption in respect of border area allowance)
Available to :Individual - Salaried employee
Section 10(14)
Exemption :Up to ₹ 1,000 per month
(Subject to certain conditions and locations. If this Exemption is taken, employee cannot claim any Exemption in respect of border area allowance)
Available to :Individual - Salaried employee
Section 10(14)
Exemption :Up to ₹ 3,900 per month
(Subject to certain conditions and locations. If this Exemption is taken, employee cannot claim any Exemption in respect of border area allowance)
Available to :Individual - Members of Armed Forces
* granted to employees working in uncongenial, unnatural climate in underground mines
Section 10(14)
Exemption :Up to ₹ 800 per month
Available to :Individual - Salaried employee
* granted to armed forces operating in high altitude areas
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)
(Subject to certain conditions and locations)
Available to :Individual - Members of Armed Forces
granted to members of armed forces
Section 10(14)
Exemption :Up to ₹ 4,200 per month (Subject to certain conditions and locations)
Available to :Individual - Members of Armed Forces
* granted to members of armed forces in Andaman and Nicobar and Lakshadweep group of Island
Section 10(14)
Exemption :Up to ₹ 3,250 per month (Subject to certain conditions and locations)
Available to :Individual - Members of Armed Forces
Section 10(7)
Exemption :Entire Amount
Available to :Individual- Salaried Employee (being a citizen of India)
Section 89
Exemption :Relief to the extent computed in accordance with Section 89 [Subject to certain conditions and circumstances]
Available to :Individual - Salaried Employee
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]
Exemption :Entire amount paid in lump-sum
Available to :Individual - Widow or other legal heirs of employee.
* 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]
Exemption :Entire amount paid as ex-gratia
Available to :Individual or legal heirs.
* (Fully taxable in case of other employees)
Section 16 (ii)
Exemption :Least 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 to :Individual - Government employee
Exemption :Exempt, subject to certain conditions.
Available to :Individual - Judges of High Court/Supreme Court
Exemption :Fully Exempt
Available to :Individual - Judges
Exemption :Fully Exempt (Subject to certain conditions)
Available to :Individual - Teacher from SAARC member State
Section 10(45)
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)
Exemption :Exempt 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 to :Individual - Retired Chairman/Member of UPSC
Exemption :Fully Exempt Individual - Government employee
Available to :Individual - Employees of UNO
  • 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

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In case of any doubt / clarification, please visit the official website of Income Tax Department.


Updated : Sept 19, 2020