INCOME TAX

ALLOWANCES ;

1.FULLY EXEMPTED :

 Foreign allowance only in case of government employees posted outside India

 House rent allowance
 House rent allowance given to high court and supreme court
 Sumptuary allowance given to judges of high court and supreme court
 Allowance from U.N.O
 Allowance to teacher or professor from SAARC member states
 Allowance to chairman/member of UPSC (fully exempted upto A.Y.2020-21)
 High altitude allowance
 Helper allowances fully exempted as he is paying more than he gets.

2.FULLY TAXABLE

 Dearness allowances additional D.A high cost of living

 City compensatory allowance
 Capital compensatory allowance
 Lunch allowance
 Tiffin allowance
 Marriage allowance
 Family allowance
 Deputation allowance
 Wardenship allowance
 Non practicing allowance
 Project allowance
 Overtime allowance
 Fixed medical allowance
 EA for non-Govt .employees
 Water and electricity allowance
 Servant allowance
 Holiday trip allowances
 Transport allowance for normal employees (w.e.f. A.Y. 2019-20)
 Any other allowance which is neither fully nor partially exempted
 Allowance to Chairman/retired chairman, member or retired members of UPSC (w.e.f. A.Y.
2021-22)
 Officiating allowance
 Cash allowance
 Planning allowance
 Medical allowance

3.PARTIALLY TAXABLE

 House rent allowances

  EA for govt. employees
 Allowance covered u/s 10(14)(i) read with rule 2BB (1)
Helper allowance

Uniform allowance

Academic allowance

Conveyance allowance

Travelling allowance

Daily allowance

Allowance covered u/s 10(14)(ii) read with rule 2BB (2)

 Any special allowance in the nature of composite hill compensatory allowance

or high altitude allowance or uncongenial climate allowance or snow
bound area allowance or Avlanche allowance. {exemption
allowed up to Rs.300 p.m. to Rs.7,000p.m }
 Any special compensatory allowance in the nature of border area or remote area or
difficult area or disturbed area allowance. {Rs.200p.m. to Rs.1,300p.m}
 Transport allowance for specified handicapped employees (exempted Rs.3,200p.m.
only for disability/handicapped employees)
 Tribal area allowance Running allowance given to employees of transport sector.
{Rs.200p.m. exempted in the state of Tamil Nadu, Madhya Pradesh, Uttar Pradesh,
Karnataka, Tripura, Assam, West Bengal, Bihar and Orissa}
 Children educational allowance. {Rs.100 p.m. exempted only for two children only}
 Hostel expenditure allowance {Rs.300 p.m. exempted only for two children only}
 Compensatory field area allowance {Rs.2,600 p.m.}
 Compensatory modified field area allowance {Rs.1,000 p.m.}
 Special allowance in the nature of counter insurgency allowance given to the members
of armed forces operating in areas away from their permanent locations for a period of
more than 30 days. {Rs.3,900 p.m.}
 Underground area allowance given to coal mine worker {Rs.800 p.m.}
 Any running flight allowance (exempted upto 70% or 10,000p.m. W.e.l )
 Island duty allowance given to armed forces posted in Andaman & Nicobar and
Lakshadweep group of islands. {Rs.3,250 p.m.}
 High altitude allowance (armed force)ALTITUDE 9000 – 15000feet = upto Rs.1,060 p.m.
Above 15000 feet =upto Rs.1,600 p.m.
 High active field area allowance {Rs.4,200 p.m.}

ADJUSTMENT IN EXEMPTED
HOUSE RENT ALLOWANCE { w.e.l }
(i)50% of salary in case of Bombay, Chennai, Calcutta & Delhi
Or
40% of salary in case of all other cities.
(ii)Actual HRA received
(iii) Actual rent paid – 10% of salary
RENT FREE ACCOMMODATION { w.e.l }
 (i)Actual rent paid by employer
(ii)below 10,00,000 population = 7.5% of (salary + DA+ Bonus +any other allowance)
10,00,000 to 25,00,000 “ “ = 10%
25,00,000 above “ “ = 15%
EMPLOYER’S CONTRIBUTION TO RPF
Less: Exempted @ 12%
Interest on RPF balance
Less: Exempted @9.5%
CONVEYANCE ALLOWANCE
Less: Actual expenses on conveyance for employment purposes.
SALE OF HOUSEHOLD MACHINE
Cost of machine xxx
Less: Amount charged from employer. xxx xxx
HELPER ALLOWANCE
Less: Exempt upto actual salary given to helper.
COMPUTATION OF INCOME FROM SALARY
Gross salary
Less: Deduction u/s 16
U/s 16 (i) standard deduction =Rs.50,000
U/s 16 (ii) Entertainment allowance
U/s 16 (iii) professional allowance
INCOME FROM SALARY.

PERQUISITES
1.EXEMPTED FROM TAX

 Free medical facilities. [ exempted for self, wife, children may be dependent or
independent, married or unmarried] and [parents, brothers and sisters who are mainly
dependent upon him] and [In owned hospital or maintained by him] and [Treatment in
Govt. hospitals.] and [treatment is taken in respect of prescribed disease or ailments
like corona in any hospital approved by principal chief commissioner.]
 Free refreshment during working hours.
 Free recreational facilities.
 Provision of telephone whether basic or cellular for official use.it is exempted even if it
is used for private or personal purpose.
 Free meals provided in remote area or at offshore installation are fully exempted.
 Free education , training or refresher course for employees.
 Leave training concession if give twice in a block of 4 years.
 Free ration received by members of armed forces.
 Perquisites allowed by govt to its employees posted abroad.
 Rent free house given to an officer of parliament ,a union minister, and leader of
opposition in parliament.
 Free residence and conveyance facilities to judges of supreme & high court.
  Free conveyance provided by employer to employee for going to or coming from place
of employment.
 Any amount contributed by employer towards pension or deferred annuity scheme.
 Employer’s contribution to staff group insurance scheme.
 Computers, laptops given to an employee for official/personal use.
 Transfer of a movable asset [computer, car or electronic items] more than 10 years old
without consideration.
 Accident insurance premium paid by employer for his own benefit.
 Interest free loan or loan at concessional rate of interest taken by employee from
employer if amount of loan does not exceed 20000 or loan is taken for medical
treatment.
 Value of any share or debentures given free cost or at concessional rate to employees
under stock option scheme approved by the central govt.
 Tax on perks paid by employer.
 Rent free accommodation given in remote or offshore areas.


2.FULLY TAXABLE

 Rent free house

 Concessional rent house
 Obligation of employee met by employer
 Any amount of life insurance premium paid by employer on the life of employee during the
previous year.
 Value of specified security or sweat equity share allotted or transferred.
 Contribution to approved superannuation fund of the employee in excess of Rs.1,50,000
 Other fringe benefits:
Interest free concessional loan.
Travelling, touring, accommodation.
Food or beverages facility.
Gift or voucher or token facility.
Credit card facility.
Club facility.
Use of movable assets.
Transfer of movable assets.
Any other benefit or amenity
 Specified perquisites allowed to Chief Election Commissioner, Election Commissioner,
chairman or retired chairman, member or retired member of UPSC [w.e.f. A.Y. 2021-22].
  Any other expenditure incurred or re-imbursed by employer to provide medical facilities in
India.
 Any fixed medical allowance given by employer to its employees.
 Leave travel concession
 Treatment in medical hospital
 car perks : small car[below 1.6 litre =1,800p.m.] big car[above 1.6 litre =2,400 p.m.]
 Electric bill paid by employer.
 Driver salary = 900 p.m.
 Salary of domestic servant paid by employer.
 Holiday home facility at Shimla
 Liability of employee paid by employer
 Premium on ULIP of employee paid by employer.
 Company sold a washing machine for Rs.20,000, cost of which was Rs.30,000.
 Education facility for children.
 Gas, water, and EB.


3.PARTIALLY TAXABLE

 Car , or any other automotive conveyance.

 Services of domestic servants including sweeper, watch-man, gardener, personal attendant
provided by employer.
 Gas, water and electricity facility.
 Education facility for employee’s children.
 Free transport allowed by employer engaged in transport business.
 Medical facility.
 Free transport facility to its employees by any transport undertaking.
 Free lunch facility Rs.50 exempted for per day