ALLOWANCES

Allowances is the fixed amount of money given periodically in addition to the salary for the purpose of meeting some specific requirements connected with the service rendered by the employees

.

1. Taxable allowances.

.

1. Dearness allowance for meeting the increased cost of living given by the employer to the employee

2. Other Taxable allowance

· Medical allowance

· Tiffin allowance

· Servant allowance

· Non practicing allowance

· Deputation allowance

· Over-time allowance

. City compensatory allowances

.

2. Partially exempted allowances.

1. House rent allowance (HRA)

HRA allowable in respect of the rent of the residential house occupied by the employee but it will not allowable to those who have own house. House rent allowance exempt u/s 10(13.A), Rule 2.A, accordingly exempted the least of the following,

· Actual HRA received

· Excess of rent paid over 10% of salary

· 50% of salary in metro cities likes Mumbai kolkatta Delhi or Chennai

· 40% of salary, if the accommodation situated at any other place.

***Here Salary= Basic pay + DA

.

2. Entertainment allowance

It is fully exempted in the hands of Govt employees where as it is taxable in the hands of Non-Govt employees. Said earlier

.

3. Other exempted allowance

.

a) Special allowance Sec.10 (14)

Any Special Allowance by Central Govt in connection with the performance of office duties exempt from Tax up to the actual amount so incurred. They are,

*Traveling allowance
*Daily or Conveyance allowance
*Helper Allowance
*Academic Research allowance
*Uniform Allowance

.

b) Special allowance to meet personal expenses U/s10 (14)

*Any special compensatory allowance exempted to Rs.300/- to Rs.7000/-
eg: snow bound area allowance

* Any special compensatory allowance in respect of Boarder are allowance, exemption up to Rs.200/- to Rs.1300/-

* Tribal area allowance exemption up to Rs.200/- (Oriissa. MP, Assam etc)

* Employees working in Transport System, exemption up to Rs6000/- per month or 70% of such allowances

* Children Education Allowance, exemption up to Rs.100/-per month maximum for 2 children

* Children Hostel allowance, exemption up to Rs.300/- per month maximum for 2 children

*Special allowance to armed force

*Transport allowance exemption up to Rs.800/-

*Under ground allowance, exemption up to Rs.800/-