Exempted allowances to Salaried Employees

Allowance: means Fixed amount of money or other substance given monthly in addition to salary to meet the particular type of expenditure.

Treatment:Allowances are part of salary and taxable in hands of the assessee if no specific exemption is given under the Income Tax Act/Rules

We have covered most of the allowances exempted under Income Tax act as on date. All other allowances are taxable in the hands of employee.

S. N.	Section	Particulars	Benefits
A.	Allowances
1.	10(13A)	House Rent Allowance (Sec. 10(13A) & Rule 2A)	Least of the following is exempt: a) Actual HRA Received b) 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Madras) c) Rent paid minus 10% of salary * Salary= Basic + DA (if part of retirement benefit) + Turnover based Commission Note:   i.  Fully Taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent  ii. It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than Rs. 1,00,000 [Circular No. 07 /2014 dated 10th October, 2013]. FAQ on HRA Exemption HRA exemption calculator
2.	10(14)	Children Education Allowance	Up to Rs. 100 per month per child up to a maximum of 2 children is exempt
3.	10(14)	Hostel Expenditure Allowance	Up to Rs. 300 per month per child up to a maximum of 2 children is exempt
4.	10(14)	Transport Allowance granted to an employee to meet expenditure on commuting between place of residence and place of duty	Up to Rs. 1600 per month (Rs. 3,200 per month for blind and handicapped employees) is exempt (notification 39/2015)
5.	Sec. 10(14)	Transport Allowance to an employee working in any transport business to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided employee is not in receipt of daily allowance.	Amount of exemption shall be lower of following: a) 70% of such allowance; or Rs. 10,000 per month.
6.	10(14)	Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office	Exempt to the extent of expenditure incurred
7.	10(14)	Any Allowance granted to meet the cost of travel on tour or on transfer	Exempt to the extent of expenditure incurred
8.	10(14)	Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty	Exempt to the extent of expenditure incurred
9.	10(14)	Helper/Assistant Allowance	Exempt to the extent of expenditure incurred
10.	10(14)	Research Allowance granted for encouraging the academic research and other professional pursuits	Exempt to the extent of expenditure incurred
11.	10(14)	Uniform Allowance	Exempt to the extent of expenditure incurred
12.	10(7)	Foreign allowances or perquisites paid or allowed by Government to its employees (an Indian citizen) posted outside India	Fully Exempt
13.	-	Allowances to Judges of High Court/Supreme Court (Subject to certain conditions)	Fully Exempt.
14.	10(45)	Following allowances and perquisites given to serving Chairman/Member of UPSC is exempt from tax: a) Value of rent free official residence b) Value of conveyance facilities including transport allowance c) Sumptuary allowance d) Leave travel concession	Fully Exempt
15.	-	Allowances paid by the UNO to its employees	Fully Exempt
16.	10(45)	Allowances to Retired Chairman/Members of UPSC (Subject to certain conditions)	Exempt subject to maximum of Rs.14,000 per month for defraying services of an orderly and for secretarial assistant on contract basis. The value of residential telephone free of cost and the number of free calls to the extent of 1500 per month shall be exempt.
17.	Sec. 10(14)	Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations)	Amount exempt from tax varies from Rs. 300 per month to Rs. 7,000 per month.
18.	Sec. 10(14)	Border area allowances, Remote Locality allowance or Disturbed Area allowance or Difficult Area Allowance (Subject to certain conditions and locations)	Amount exempt from tax varies from Rs. 200 per month to Rs. 1,300 per month.
19.	Sec. 10(14)	Tribal area allowance given in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Orissa	Rs. 200 per month
20.	Sec. 10(14)	Compensatory Field Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations)	Rs. 2,600 per month
21.	Sec. 10(14)	Compensatory Modified Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations)	Rs. 1,000 per month
22.	Sec. 10(14)	Counter Insurgency Allowance granted to members of Armed Forces operating in areas away from their permanent locations. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations)	Rs. 3,900 per month
23.	Sec. 10(14)	Underground Allowance is granted to employees working in uncongenial, unnatural climate in underground mines	Up to Rs. 800 per month
24.	Sec. 10(14)	High Altitude Allowance is granted to armed forces operating in high altitude areas (Subject to certain conditions and locations)	a) Up to Rs. 1,060 per month (for altitude of 9,000 to 15,000 feet) b) Up to Rs. 1,600 per month (for altitude above 15,000 feet)
25.	Sec. 10(14)	Highly active field area allowance granted to members of armed forces (Subject to certain conditions and locations)	Up to Rs. 4,200 per month
26.	Sec. 10(14)	Island Duty Allowance granted to members of armed forces in Andaman and Nicobar and Lakshadweep group of Island (Subject to certain conditions and locations)	Up to Rs. 3,250 per month

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