ALLOWANCES

Atithi Sharma
Jijo Thomas
Siva Karthik
Lalitha Deepthi
Murali Krishna
Vasu Chabra
 Allowance: It is generally defined as a fixed
quantity of money or other substance given
regularly in addition to salary for the purpose of
meeting some particular requirement by
employee
 City compensatory allowance: Always taxable
 House rent allowance[sec.10(13A)]: The least of three
is exempt from tax
1. An amount equal to 50% of salary where house
situated in Bombay, Calcutta, Delhi or Madras and
amount equal to 40% of salary where house is
situated at any other place
2. Actual HRA received
3. The excess of rent paid over 10% of salary

Salary= Basic pay+ DA+ commission on turnover

Entertainment allowance[sec.16(ii)]:
Entertainment allowance is first included in salary income
under the head ‘salaries’ and thereafter a deduction is given
on the following basis
 Government employee: least of following is exempted
a) Rs 5000
b) 20% of basic salary
c) Amount of entertainment allowance granted during the
previous year
 Non Government employee: No deduction available
SPECIAL ALLOWANCES[SEC10(14)]
When exemption depends on actual expenditure by the
employee:
Allowances are exempted to the extent of amount
utilized for the specific purpose for which allowance is
received
a) The amount of allowance (or)
b) The amount utilized for the purpose for which
allowance is given.

Which ever is lower

 List of such allowances:
 Travelling allowance
 Conveyance allowance
 Daily allowance
 Helper allowance
 Research allowance
 Uniform allowance
When exemption does not depend on expenditure:
Exemption to the extent of:
a) Amount of allowance or
b) The amount specified in rule 2BB
Which ever is lower
SEC 2BB
 Special compensatory allowance: Amount varies
from Rs 300 to Rs 700 per month
 Border area allowance: Amount varies from Rs 200
to Rs 1300 Per month
 Tribal area allowance: Rs 200 Per month
 Children education allowance: Rs 100 per month per
child maximum of two children
 Island duty allowance: Up to Rs3250 per month
 Underground allowance: Limited to Rs800 per month
 Transport allowance: Up to Rs800(Rs 1600 for blind or
orthopedically handicapped)
OTHER ALLOWANCES
 Allowance to government employees outside
India[sec.10(7)]: Completely exempted from tax
 Tiffin allowance: Fully taxable

 Fixed medical allowance: Fully taxable

 Servant allowance: Fully taxable

 Allowance to high court and supreme court judges:
Not taxable
 Allowance received from UNO: Not taxable
THANK YOU