<\/p>\n

\n
•         What
  \nis allowance?<\/strong><\/li>\n<\/ul>\n

  <\/p>\n

  The
  \nallowance is the fixed amount of money or other substance given regularly in
  \naddition to salary for the purpose of meeting some particular requirement
  \nconnected with the services rendered by the employee or as compensation for
  \nunusual conditions of the service. The allowances are fixed amount and it is
  \nnot directly related to actual expenditure of the employee.<\/p>\n

  <\/p>\n

  \n
  •         There
    \nare some special allowances which are exempt from tax u\/s 10(14), that we can
    \nclassify into two categories namely:<\/strong> <\/strong><\/li>\n<\/ul>\n

    1.     
    \n<\/strong>When exemption
    \ndepends upon actual expenditure by employee;<\/strong><\/p>\n

    2.     
    \n<\/strong>When exemption
    \ndoes not depend upon actual expenditure by employee.<\/strong><\/p>\n

    The
    \nprovisions of section 10(14) are given below:<\/p>\n

    1.    
    \n<\/strong>Types
    \nof allowances, whose exemption depends upon the actual expenditure by the
    \nemployee-:<\/strong><\/p>\n

    Under
    \nthis category, the following allowances are exempt u\/s 10(14) to the extent the
    \namount is utilized for the specified purpose for which the allowance is
    \nreceived. In other words, in the cases given below the amount of exemption<\/strong> u\/s 10(14) is:-<\/p>\n

    <\/p>\n

    \n
    •          The
      \namount of the allowance given by employer; or<\/li>\n
    •          The
      \namount utilized for the specific purpose for which allowance is given,<\/li>\n<\/ul>\n

      <\/p>\n

      Whichever
      \nis less.<\/p>\n

      Exemption
      \nis available on the aforesaid basis in the case of following allowances-<\/p>\n\n\n\n\n\n\n\n\n\n

      \n Name \n of Allowance<\/strong><\/strong><\/p>\n<\/td>\n	\n Nature of Allowance<\/strong><\/strong><\/p>\n<\/td>\n<\/tr>\n
      \n Travelling allowance\/ Transfer \n allowance <\/p>\n<\/td>\n	\n Any allowance (by whatever name \n called) granted to meet the cost of travel on tour or on transfer of duty \n (including any sum paid in connection with transfer, packaging and \n transportation of personal effects on such transfer.)  Please Note: – Transport allowance which is \n given for the purpose of travelling form residence to office is NOT covered \n here. <\/p>\n<\/td>\n<\/tr>\n
      \n Conveyance allowance<\/p>\n<\/td>\n	\n Allowance \n granted to meet the expenditure on conveyance in performance of duties of an \n office (Kindly noted that expenditure for covering the journey between office \n and place of residence is not treated as \u201cexpenditure in performance of \n duties of office\u201d. It is exempt under 2nd<\/sup> category.)<\/p>\n<\/td>\n<\/tr>\n
      \n Helper allowance<\/p>\n<\/td>\n	\n Any allowance (by whatever name \n called) granted to meet the expenditure on a helper where such helper is \n engaged for the performance of official duties.<\/p>\n<\/td>\n<\/tr>\n
      \n Daily allowance<\/p>\n<\/td>\n	\n Any allowance whether granted on tour \n or for the period of journey in connection with transfer, to meet the \n ordinary daily charges incurred by an employee on account of absence from his \n normal place of duty.<\/p>\n<\/td>\n<\/tr>\n
      \n Uniform allowance<\/p>\n<\/td>\n	\n Any allowance (by whatever name \n called) granted to meet the expenditure on the purchase or maintenance of \n uniform for wear during the performance of duties of an office.<\/p>\n<\/td>\n<\/tr>\n
      \n Research allowance<\/p>\n<\/td>\n	\n Any allowance (by whatever name \n called) granted for encouraging the academic research and training pursuits \n in educational and research institution.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Note:<\/strong> As stated \nearlier, the amount of exemption in the above cases is amount of allowance or \nthe expenditure incurred for the specific purpose for which allowance is given, \nwhichever is lower.<\/p>\n The \nprovisions illustrated below will help you to get the clear idea of the tax \ntreatment of the aforesaid allowances. :<\/p>\n\n\n\n\n\n\n \n Column 1<\/p>\n<\/td>\n \n Column 2<\/p>\n<\/td>\n \n Column 3<\/p>\n<\/td>\n \n Column 4<\/p>\n<\/td>\n \n Column 5<\/p>\n<\/td>\n<\/tr>\n \n Nature of \n Allowance<\/p>\n  <\/p>\n<\/td>\n \n Amount of \n allowance given by employer<\/p>\n      (Rs.)<\/p>\n<\/td>\n \n Amount \n actually spent for the purpose given in column 1.  (Rs.)<\/p>\n<\/td>\n \n Amount exempt <\/strong>(least among column 2 & \n 3)   (Rs.)<\/p>\n<\/td>\n \n Amount chargeable<\/strong> to tax (column 2 less \n column 4)   (Rs.)<\/p>\n<\/td>\n<\/tr>\n \n Travelling allowance given for \n official purpose<\/p>\n<\/td>\n \n 45,000<\/p>\n<\/td>\n \n 40,000<\/p>\n<\/td>\n \n 40,000<\/p>\n<\/td>\n \n 5,000<\/p>\n<\/td>\n<\/tr>\n \n Transfer allowance given at the time \n of transfer of employee from one city to another.<\/p>\n<\/td>\n \n 30,000<\/p>\n<\/td>\n \n 33,000<\/p>\n<\/td>\n \n 30,000<\/p>\n<\/td>\n \n Nil<\/p>\n  <\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n  <\/p>\n 2.     \n<\/strong>Types \nof allowances, whose exemption does not depend upon actual expenditure by \nemployee<\/strong><\/p>\n Under \nthis category, the amount of exemption does not depend upon expenditure \nincurred by the employee. Regardless of amount of expenditure, the allowances \ngiven below are exempt to the extent of-<\/p>\n <\/p>\n \n          The amount of \nallowance; or<\/strong><\/li>\n          The amount \nspecified in rule 2BB<\/strong><\/li>\n<\/ul>\n <\/p>\n Whichever is \nless.<\/strong><\/p>\n On \nthe above basis exemption is available in the case of the following allowances.<\/p>\n   Important point:<\/strong><\/p>\n It \nmay be noted that in these cases, the amount of actual expenditure is not taken \ninto consideration.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n \n Sr. No.<\/strong><\/p>\n<\/td>\n \n Name of allowance<\/strong><\/p>\n<\/td>\n \n Nature \n of allowance<\/strong><\/p>\n<\/td>\n \n Exemption as specified in rule 2BB<\/strong><\/p>\n<\/td>\n<\/tr>\n \n 1.<\/p>\n<\/td>\n \n Special compensatory (Hills Area \n Allowance)<\/p>\n<\/td>\n \n  Any special compensatory allowance in the \n nature of special compensatory (hills areas) allowance or high altitude \n allowance or climate allowance.<\/p>\n<\/td>\n \n Amount exempt from tax varies from \n Rs.300 to Rs.7000 per month as notified.  <\/p>\n  <\/p>\n<\/td>\n<\/tr>\n \n 2.<\/p>\n<\/td>\n \n Children Education Allowance<\/p>\n<\/td>\n \n Allowance given for children\u2019s \n education.<\/p>\n<\/td>\n \n Up to Rs. 100 per month per child for \n maximum TWO children.<\/p>\n<\/td>\n<\/tr>\n \n 3.<\/p>\n<\/td>\n \n  Hostel Expenditure Allowance<\/p>\n<\/td>\n \n Allowance granted to an employee to \n meet the hostel expenditure on his child<\/p>\n<\/td>\n \n Up to Rs. 300 per month per child for \n maximum TWO children.<\/p>\n<\/td>\n<\/tr>\n \n 4.<\/p>\n<\/td>\n \n Tribal areas\/ scheduled areas \n allowance<\/p>\n<\/td>\n \n It is given in (a) Madhya Pradesh; (b) \n Tamil Nadu; (c) Uttar Pradesh; (d) Karnataka; (e) Tripura; (f) Assam; (g) \n West Bengal; (h) Bihar; (i) Orissa.<\/p>\n<\/td>\n \n Rs. 200 per month.<\/p>\n<\/td>\n<\/tr>\n \n 5.<\/p>\n<\/td>\n \n Allowance for transport employee.<\/p>\n<\/td>\n \n Allowance granted to employee  working in any transport system to meet his \n personal expenditure during his duty performed in the course of running of \n such transport from one place to another place provided that such employee is \n not in receipt of daily allowance.<\/p>\n<\/td>\n \n Exemption is <\/p>\n (a) 70 per cent of such allowance; or <\/p>\n (b) Rs. 10,000 per month, <\/p>\n Whichever \n is Less.<\/p>\n<\/td>\n<\/tr>\n \n 6.<\/p>\n<\/td>\n \n Transport \n Allowance<\/strong><\/p>\n<\/td>\n \n Allowance granted to employee to meet \n his expenditure for the purpose of travelling between the place of residence \n and the place of his duty.<\/strong><\/p>\n<\/td>\n \n Up to Rs. 800 per month. (Rs. 1,600 \n per month in case of an employee who is blind or handicapped)<\/sup><\/p>\n  <\/sup>In the case of Chairman\/ members of \n UPSC, transport allowance is fully exempt from tax.<\/sup><\/em><\/p>\n<\/td>\n<\/tr>\n \n 7.<\/p>\n<\/td>\n \n Underground Allowance<\/p>\n<\/td>\n \n Allowance granted to an employee who \n is working in unnatural climate in underground mines.<\/p>\n<\/td>\n \n Up to Rs. 800 per month.<\/p>\n<\/td>\n<\/tr>\n \n 8.<\/p>\n<\/td>\n \n Border Area Allowance <\/p>\n<\/td>\n \n Any special compensatory allowance in \n the nature of border area allowance or remote locality allowance or difficult \n area allowance or disturbed area allowance.<\/p>\n<\/td>\n \n The amount of exemption varies from \n Rs. 200 per month to Rs. 1,300 per month.<\/p>\n<\/td>\n<\/tr>\n \n 9.<\/p>\n<\/td>\n \n Compensatory field area allowance<\/p>\n<\/td>\n \n Compensatory \n Field Area Allowance. If this exemption is taken, employee cannot claim any \n exemption in respect of border area allowance (Subject to certain conditions \n and locations)<\/p>\n<\/td>\n \n Up to Rs. 2,600 per month.<\/p>\n<\/td>\n<\/tr>\n \n 10.<\/p>\n<\/td>\n \n Compensatory modified area allowance<\/p>\n<\/td>\n \n Compensatory \n Modified Area Allowance. If this exemption is taken, employee cannot claim \n any exemption in respect of border area allowance (Subject to certain \n conditions and locations)<\/p>\n<\/td>\n \n Up to Rs. 1,000 per month.<\/p>\n<\/td>\n<\/tr>\n \n 11. <\/p>\n<\/td>\n \n Island Duty Allowance<\/p>\n<\/td>\n \n Allowance granted to the members of \n armed forces in the nature of island (duty) allowance in Andaman and Nikobar \n and Lakshadweep group of island.<\/p>\n<\/td>\n \n Up to Rs. 3,250 per month. <\/p>\n<\/td>\n<\/tr>\n \n 12.<\/p>\n<\/td>\n \n Counter insurgency allowance<\/p>\n<\/td>\n \n Allowance granted to the members of \n armed forces operating in areas away from their permanent locations.  If this exemption is taken, the same \n employee cannot claim any exemption in respect of border area allowance mentioned \n above.<\/p>\n<\/td>\n \n Up to Rs. 3,900 per month.<\/p>\n<\/td>\n<\/tr>\n \n 13.<\/p>\n<\/td>\n \n Highly active field area allowance<\/p>\n<\/td>\n \n Allowance granted to the members of \n armed forces in the nature of special compensatory highly active field area \n allowance<\/p>\n<\/td>\n \n Up to Rs. 4,200 per month.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Note:<\/strong> As stated \nearlier, the amount of exemption in the above cases is amount of allowance or \namount specified in the rule whichever is lower.<\/p>\n  <\/p>\n How to save tax \non the allowances by restructuring of salary?<\/strong><\/p>\n Taxpayer \ncan request his employer and ask for restructuring of the salary according to \nthe exemptions available under the income tax act.<\/p>\n  For example, if employer is paying allowances of \nRs. 1500 to employee which are fully taxable.<\/p>\n  Now employer can restructure this allowance in \nfollowing manner:<\/p>\n Children \nEducation Allowance Rs.100<\/p>\n Hostel \nExpenditure Allowance Rs.300<\/p>\n Transport \nAllowance Rs.800<\/p>\n Other \nAllowances Rs. 300<\/p>\n Total Exempt allowances \nis Rs. 1200<\/strong><\/p>\n Total taxable allowance \nis Rs. 300<\/strong><\/p>\n So \nby doing proper restructuring of salary employee can save the tax on allowances. <\/p>\n","protected":false},"excerpt":{"rendered":"         What is allowance? The allowance is the fixed amount of money or other substance given regularly in addition to salary for the purpose of meeting some particular requirement connected with the services rendered by the employee or as compensation for unusual conditions of the service. The allowances are fixed amount and it … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[4],"tags":[58],"class_list":["post-82","post","type-post","status-publish","format-standard","hentry","category-income-tax","tag-allowances"],"yoast_head":"\n