Special

Special Allowances
Allowances under
under Section
Section 10
10 for
for
Salaried
Salaried Employees
Employees
Section 10 (14)

Under special allowance act of Section 10

(14), exemption is granted based on the
amount utilised for a specific purpose by
the employee. The exemption depends on
the following points:
Allowance amount.
Actual amount used for the purpose for which
the allowance has been granted.
Section 10 (14) (i)

 Under Section 10 (14)(i), allowances are exempted to the

extent of the amount received as allowance or amount
spent on certain duties, whichever is the lower figure.
Allowances covered in this category are:

 Daily Allowance: Daily allowance is given to employees to

meet the daily charges incurred when on tour or for the
duration of a transfer in the job. This type of allowance
is granted when the employee is not in the usual place of
duty.

 Travel Allowance: Travel allowance covers costs related to

travel while on tour or on transfer while on duty. This
allowance also includes travel costs incurred while getting
transferred to another location, including packaging or
transport of personal objects.
 Research/ Academic Allowance: Allowance granted for the
purpose of encouraging academic and research related training,
education or professional duties is termed as academic or research
allowance.

 Conveyance Allowance: Allowance for conveyance is granted to

employees in case of expenses incurred while travelling for duties
of office. However, the employer does not pay for travel from
home to work as it is not considered as a duty of the office. This
allowance comes under a different section called as ‘
Transport allowance’ and is not exempt from tax.

 Helper Allowance: Sometimes your employer allows you to

appoint a helper for performing official duties of the office. In such
cases, helper allowance is granted.

 Uniform Allowance: Allowance when given for the purchase or

maintenance of uniform, required to be worn while on duty is
referred to as uniform allowance. This allowance can be opted for
only when an office duty prescribes a specific uniform
Usually, it is not required to furnish details of
the expenses incurred under this
category of allowance unless the expense
are disproportionate to the salary or
unreasonable in reference to the duty
performed by the employee.
At most times, it is not required for you to
keep a proof of documents and a simple
declaration serves the purpose.
Section 10 (14) (ii)
 Under this section, allowance granted to employees for
working under certain set of conditions while on duty. The
amount exempted is either the amount received as allow
ance or the limit mentioned, whichever is lesser:
 The types of allowances in this category and exempt in
allowances are listed below:

 Compensatory allowance for working in areas of high altitude or

hilly areas, also known as climate allowance:
 Hilly areas of HP, UP, J&K and North East - Rs.800
 Siachen are of J&K - Rs.7000 per month
 Common places above 1000mtr or above - Rs.300

 Scheduled or tribal or agency areas allowance:

 Karnataka, West Bengal, MP, Assam, Orissa, Tamil Nadu, Bihar, UP and
Tripura. - Rs. 200
Allowance for duty in border area or remote area or any difficult/disturbed areas:Allowances ranging
from Rs.200 to Rs.1300 pm are exempt under the Rule 2BB.

Allowance for children education: Rs.100 pm for each child and a maximum of two children.

Allowance for working in a transport system for personal expenses, while on duty: 70% of allowance up
to Rs.10,000 pm.

Field area allowance: Areas of Nagaland, J&K, HP, UP, AP, Sikkim and Manipur – Rs.2600 pm

Allowance for employee’s children’s hostel expenses: Rs.300 pm for each child up to two children.

Allowance granted to armed forces for cases of counter insurgency: Rs.3900 per month.

Transport allowance to physically disabled employee on duty to travel to work: Rs.1600 per month.

Transport allowance for commute between work and residence: Rs.1600 pm.

Compensatory allowance for duty in modified field area: Specific areas of West Bengal, North East,
Rajasthan, J&K, UP and HP – Rs.1000 pm.

Island Duty allowance granted to armed forces in Andaman & Nicobar and Lakshadweep: Rs.3250 per
month.

Allowance for working in underground mines: Rs.800 per month.

Special compensatory highly active field area allowance: Rs.4200 pm.

Allowance for armed forces in a high altitude region:9000 – 15,000ft – Rs.1060 pm

Above 15,000 ft – Rs.1600 pm
Special Individuals Receiving
Allowances Exempt
There are certain individuals who also receive
allowances exempt under Section 10:
Allowances granted to High Court Judges.
Allowance given to a UNO employee.
Sumptuary allowance received by Supreme
Court and High Court Judge.
Allowances granted to government employees
who are Indian citizens, working abroad.
 Sections Particulars Exemption limit
Sec 10(1) Agricultural Income (from agricultural Fully exempt from tax
land, farm house, or sapling seedling
grown in nursery) for self employed
Sec 10(2) Income received from HUF (Hindu- Fully exempt from tax
undivided family) by a tax payer in his
capacity as a member of HUF
Sec 10(10C) Compensation received at the time of Exempt from tax up to a
voluntary retirement for salaried certain limit of
employees compensation amount Rs.
5,00,000
Sec 10(10D) Amount received under life insurance Fully exempt from tax
policy including policy bonus
Sec 10(11) Amount withdrawn from Provident fund Fully exempt from tax
(12) by salaried employees
Sec Compensation received in case of any Fully exempt from tax
10(10BC) disaster from central government
Sec House rent allowance (HRA) to
10(13A) salaried employees (rent paid by
the employees to stay in a rented
house)
Fully exempt from tax
and 50% of salary
amount if residential
house is in metro cities
otherwise 40% in non-
metro

Sec Children education allowance Exemption up to Rs.

10(14) (salaried employees can claim a 100 per month per
pre defined allowance for two child
children)

Sec Special compensatory allowance Exemption up to Rs.

10(14) for hilly areas or climate 7,000 per month
allowance or high altitude
allowance to salaried employees

Sec Border area allowance or remote Exemption up to Rs.

10(14) area or any disturbed area 1,300 per month
rule 2BB allowance to salaried employees
Sec 10(14) Tribal area allowance in: Exemption up to Rs.
Madhya Pradesh, Tamilnadu, 200 per month
Assam, UP, Karnataka, West
Bengal, Bihar, Orissa and
Tripura to salaried employees
Sec 10(14) Compensatory field area Exemption up to Rs.
allowance available in various 2,600 per month
areas of AP, Manipur, Sikkim,
Nagaland, HP, UP and J&K to
salaried employees
Sec 10(14) Transport allowance granted to Exemption up to Rs.
employee for the purpose of 1,600 (Rs. 3,200 for
commuting from home to office blind, deaf and dumb)
salaried employees per month
Sec 10(15) Income from tax free securities Fully exempt from tax
to all assesses (Income
received as interest from
securities, bonds, deposits
notified by government)
Sec Income from mutual fund (Any Fully exempt from tax
10(23D) income earned from mutual
funds registered under SEBI or
set-up by any PSU or authorized
by RBI)
Sec 10(34) Income from dividends (Tax paid Fully exempt from tax
by the company over the profits
is considered as the final
payment of tax no further credit
to be claimed as dividends)
Sec 10(38) Long term capital gains on Fully exempt from tax
transfer of shares and securities
Sec 10(43) Reverse Mortgage (Any amount Fully exempt from tax
received by the individual as loan
in lump-sum or in installments in
transaction of reverse mortgage)
Sec 10(44) New Pension System exemption Fully exempt from tax
(Any income received by any
person on the behalf of New
pension system)
Sec 10(49) Income of National Fully exempt from
financial holdings tax
company