Is Your Salary Allowance Taxable in India

Allowance is money that you get from your employer for meeting some particular expenses such as transport, HRA. All these allowances are taxable unless it is specifically exempted under income tax act. There are two types of allowance as defined under income tax act;

  1. House Rent Allowance
  2. Prescribed Allowance

House rent allowances are exempted from income tax based on the area where you live and some other conditions mentioned in Section 10 (13A) of income tax act.   

Is Your Salary Allowance Taxable Under prescribed allowance category there are certain allowances which are exempted to the extent of actual payment received or the amount spent for the performance of duties and certain other allowances which are exempted to the extent of amount received or amount specified.

Specified Allowances exempted the extent of actual payment received or the amount spent for the performance of duties which ever is less

Traveling Allowance

Traveling allowance is granted by an employer to an employee on being transferred from the normal place of duty. It’s granted by the employer to meet the cost of your travel, packing and transportation expenses are exempted to the extent of amount spent or the amount granted to you which ever is less. For example: if the total amount spent by you is Rs. 1, 00, 000 and the traveling allowance granted to you is Rs. 1, 20,000 then amount exempted is Rs. 1, 00,000 and balance amount of Rs. 20, 000 will be taxable.

Generally in a company, the employer use to reimburse the actual amount spent on your transportation. If the amount spent by you is reimbursed by employer then the entire amount is exempted.

Daily Allowance

On account of absence from your normal work location employer use to issue an amount generally per day basis to meet the ordinary daily expenditure at such other location. Daily allowance can be issued on being transferred from a present location to other location or it can also be issued on a tour to places other than your normal work location.

In case of such allowances the amount received from employer or the amount spent which ever is less will be exempted and the balance will be taxable. For example: if your employer has given Rs. 1, 000 per day as daily allowance and you have spend the entire amount then nothing will be taxable for your. If amount spent is less than the amount given by employer then the balance amount will be taxable.

Conveyance Allowance

If you are receiving an allowance to meet the expenditure incurred on conveyance on performance of duties of an office or employment of profit then you are eligible for an exemption. The exemption amount is lower of the amount you spent on conveyance or the amount received from employer and the balance left out will be taxable.

If free conveyance services are provided by the employer then exemption is not available and the entire amount received if any will be taxable.

Helper Allowance

If you are getting helper allowance and the helper is assigned to perform duties of an office then the amount spent or the allowance received which ever is lower will be exempted and the balance will be taxable.

Academic Allowance

Any allowance received and spent on your research and training pursuits in education and research institutions are exempted to the extent of lowest of the amount spent and received from employer.

Uniform Allowance

Expense incurred for the purchase or maintenance of uniform for wear during the performance of duties of office are eligible for exemption to the extent of amount spent or allowance received which ever is lower.

Certain Specified Allowances are exempted to the extent of amount received or amount specified which ever is lower;

Income tax act specified certain allowances which are exempted to the extent specified or the amount received from employer which ever is lower. Lists of those allowances are below;

Allowance Exemption Amount specified Amount Exempted
Children Education Allowance  Rs. 100 per month per child up to a maximum of 2 children  Actual Amount received per child or exemption amount specified which ever is less

  • Exemption is available up to 2 children
Hostel Expenditure Allowance Rs. 300 per month per child up to a maximum of 2 children Actual Amount received per child or exemption amount specified which ever is less

  • Exemption is available up to 2 children
Tribal Area Rs. 200 per month Amount received or Exemption amount specified which ever is less
Hilly area Rs. 300 per month to Rs. 7000 per month based on the places of your service Amount received or Exemption amount specified which ever is less
Border Area Rs. 200 per month to Rs. 1, 300 per month Amount received or Exemption amount specified which ever is less
Compensatory Field Area Rs. 2, 600 per month Amount received or Exemption amount specified which ever is less
Compensatory Modified Field Area Rs. 1, 000 per month Amount received or Exemption amount specified which ever is less
Counter insurgency Rs. 3, 900 per month Amount received or Exemption amount specified which ever is less
Transport Allowance
  • For normal people Rs. 800 Per month
  • For blind or orthopaedically handicapped Rs. 1, 600 per month
Amount received or Exemption amount specified which ever is less
Underground Rs. 800 per month Amount received or Exemption amount specified which ever is less
High Altitude Rs. 1060 per month or Rs. 1600 per month Amount received or Exemption amount specified which ever is less
Field Area Rs. 4, 200 per month Amount received or Exemption amount specified which ever is less
Island Rs. 3250 Per month Amount received or Exemption amount specified which ever is less

 

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