Allowances are the fixed amounts which are apart from the salary that is paid by an employer to the employee to meet some particular requirements. There are mainly 3 types of allowances there are
- Partially Exempted.
- Fully Exempted.
- Taxable Allowances.
1. House Rent Allowance (HRA): To meet the accommodation expenses House Rent Allowance is provided to the employee. HRA is exempted under section 10 (13A), and the least of the following is exempted from the tax.
- House Rent Received by the employee.
- An amount equal to 50% of salary where residential house is situated at Bombay, Delhi/ Chennai, Kolkatta. An amount equal to 40% of the salary where residential is situated at any other place.
- Excess of rent paid over 10% of the salary.
2. Fixed Medical Allowance: Medical Allowance is paid to the employee or to his family members at the time of cost incurred during treatment when they fall sick. If the reimbursement is more than Rs. 15,000/- per year then it is taxable.
3. Special Allowance: This Allowance comes under Section 14(i) to meet personal expenses and meeting official expenditure.
4. Transport Allowance: For blind or orthopedically handicapped employees transport expenses are exempted up to 800 per month maximum Rs. 1600/- Per month. These costs are provided for the employee to go from office to home and home to office.
5. Conveyance Allowance: Allowance granted to meet the expenditure incurred on conveyance in the performance of duty. It should be noted that if the employer has provided free conveyance to the employee for the performance of duty, then this allowance is fully taxable.
6. Uniform Allowance: Allowance granted to meet the expenditure incurred on the uniform for wear during the performance of duty.
7. Allowances to meet the cost of travel on transfer or on tour.
8. Allowance paid as DA in TA Bill.
9. Allowance on Children Education.
10. Allowance on Children Hostel.
11. An Employee working in the transport system is granted an allowance.
12. Allowance granted for encouraging the research, academic.
13. Remote area, Hilly area, field allowances.
- Foreign Allowance.
- High Court Judges/ Allowances to Supreme Court.
- Helper/ Servant Allowance.
1. Dearness Allowance (DA): Dearness allowance is fully taxable.
2. Fixed medical allowance.
3. City compensatory allowance.
4. Helper/ Servant Allowance.
5. Tiffin Allowance.
6. Project Allowance.
7. Deputation Allowance.
8. Non-practicing Allowance.
Allowances are exempted to the Extent of
There are 2 types of allowances that are exempted to the extent and chosen from whichever is less. They are
- Actual Amount Received.
- Limit Specified.
|S.no.||Name of the Allowance||Place at which allowance is exempted||Limit to which allowance is exempted|
|1.||Children education allowance||Whole of India||Rs. 100/- per month up to a maximum of 2 Children.|
|2.||Hostel Expenditure Allowance||Whole of India||Rs. 300/- per month up to a maximum of 2 Children.|
|3.||Transport Allowance||Whole of India||
|4.||Underground Allowance||Whole of India||Rs. 800/- per month.|
|5.||Any allowance granted to an employee working in the transport system.||Whole of India||
So, these are the allowances or perquisites paid or allowed from Government of India to a citizen of India. For more information Consult your CA Except.