Allowanaces

Allowances

Allowances [Section 15]

Tax Treatment of Various Allowances are as under:

Allowances	Treament
House Rent Allowance (HRA) [Sec 10(13A) and rule 2A]	Minimum of the following is exempted from tax: a. Actual HRA received. b. Anamount equal to 50% of salary (when house is situated in any of metrocities) or 40% of salary (for any other place). c. The excess of rent paid over 10% of salary. [Arithmetically, (Rent Paid 10% of Salary)] Notes 1. Salary heremeans: Basic + D.A. (if forms a part of retirement benefit) + Commission as a fixed % on turnover. 2. Exemption is not available if employee lives inhis own house, or in a house for which he does not pay anyrent. Click here for HRA Exemption Calculator
Children Education Allowance	Minimum of the following is exempted from tax - a) Rs.100/- per month per child (to the maximum oftwo children) b) Actual amount received for eachchild (to the maximum of two children) Note: Child does not includegrandchild.
Children Hostel Allowance	Minimum of the following is exempted from tax - a) Rs.300/- per month per child (to the maximum oftwo children) b) Actual amount received for eachchild (to the maximum of two children)
Transport Allowance¹	Minimum of the following shall beexempted a) Actual amount receivedor b) Rs 800 p.m. In case of Blind and Orthopaedically handicapped employee: Exempted to the extent ofRs.1600 p.m.
Truck Driver's Allowance	Minimum of the following shall beexempted: a) 70% of allowance. b) Rs.10,000 p.m.
Conveyance Allowance	Exempted to the extent of expenditure incurred for office purpose
Helper / Assistant Allowance	Exempted to the extent of actual expenditure incurred on such helper or assistant for official purpose
Profession Development Allowance	Exempted to the extent of actual expenditure incurred for such purpose
Uniform Allowance	Exempted to the extent of actual expenditure incurred for such purpose
Entertainment Allowance	Fully Taxable
City Compensatory Allowance	Fully Taxable
Tiffin Allowance or Servant Allowance	Fully Taxable
Fixed Medical Allowance	Fully Taxable
Other Allowances	Exempt upto mentioned under Rule 2BB. Otherwise fully taxable

^1.to meet the expenditure for the purpose of travelling between office & home

Special Exemption

Allowance to Government employees outside India [10(7)]: Any allowance paid or allowed outside India by the Government to an Indian citizen for rendering services outside India is wholly exempt from tax.
Allowance received from UNO (United Nations Organisation): Allowance paid by the UNO to its employees is exempt.
Allowance to High Court or Supreme Court Judges: Any allowance paid to Judges of High Court under section 22A(2) and sumptuary allowance under section 22C of High Court Judges (Conditions of Service) Act, 1954 is not taxable. Allowance to Supreme Court Judges under section 23B of the Supreme Court Judges (Conditions of Service) Act, 1958 is exempt.

Special allowances as prescribed in rule 2BB

The following special allowances are notified by the Government as exempt u/s 10(14)(ii):

Name of allowance
Place
Exemption
1. Any allowance (by whatever name called) granted to meet the cost of travel on tour or on transfer
Any place
To the extent of amount incurred
2. Any allowance, whether granted on tour or for journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
Any place
To the extent of amount incurred
3. Any special compensatory allowance in the nature of special compensatory (hilly area) allowance or high altitude allowance or uncongenial climate allowance or snow bound area allowance or avalanche allowance.
a. Specified area of Manipur, Arunachal Pradesh, Sikkim, Uttar Pradesh, Himachal Pradesh, Jammu & Kashmir
Rs. 800 p.m.
b. Siachen area of Jammu & Kashmir.
Rs.7000 p.m.
c. All places located at a height of 1,000 meters or more above the sea level, other than places specified above.
Rs.300 p.m.
4. Any special compensatory allowance inthe nature of Border Area Allowance or Remote Locality allowance or Difficult Area Allowance or Disturbed Area Allowance.
1. Specified area of Little Andaman, Nicobar & Narcondum Islands, North and Middle Andamans, Throughout Lakshadweep Minicoy Islands, All places or north of the demarcation line, Himachal Pradesh, Mizoram, Jammu & Kashmir, UP, Sikkim
Rs.1300 p.m.
2. Installations in the Continental Shelf of India & the Exclusive Economic Zone.
Rs.1100 p.m.
3. Specified area of:
a. Throughout Arunachal Pradesh other than areas covered by point (1) above.
b. Throughout Nagaland
c. South Andaman (including Port Blair)
d. Throughout Lunglei District (excluding areas beyond 25 km, from Lunglei town) of Mizoram.
e. Dharmanagar, Kailasahar, Amarpur and khowai inTripura.
f. Jammu and Kashmir & Himachal Pradesh
Rs.1050 p.m.
4. Specified area of Throughout Aizawal district of Mizoram, Tripura, Manipur, Himachal Pradesh, Jammu & Kashmir
Rs. 750 p.m.
5. Jog falls in Shimoga district in Karnataka.
Rs. 300 p.m.
6. Specified area of Himachal Pradesh, Assam & Meghalaya.
Rs. 200 p.m.
5. Tribal area / Schedule Areas / Agency Areas allowance
Specified area of (a) Madhya Pradesh; (b) Tamil Nadu; (c) Uttar Pradesh; (d) Karnataka; (e) Tripura; (f) Assam; (g) West Bengal; (h) Bihar; (i) Orissa.
Rs. 200 p.m.
6. Any allowance in the nature of high altitude granted to the member of Arm force operating in high altitude.
(a) For altitude of 9000 to 15000 ft.
(b) For altitude above 15000 ft.
Rs. 1060 p.m.
Rs. 1600 p.m.
7. Under Ground Allowance to an employee who is working in uncongenial, unnatural climate in under ground coal-mines.
Whole of India
Rs. 800 p.m.
8. Compensatory field Area Allowance [no exemption is available in respect of an allowance mentioned at 4 supra]
Specified area of Arunachal Pradesh, Manipur & Nagaland, Sikkim, Himachal Pradesh, Uttar Pradesh, Jammu & Kashmir
Rs. 2600 p.m.
9. Compensatory Modified field area allowance [no exemption is available in respect of an allowance mentioned at 4 supra]
Specified area of Punjab, Rajasthan, Haryana, Himachal Pradesh, Arunachal Pradesh, Assam, Mizoram, Tripura, Uttar Pradesh, Jammu & Kashmir, Sikkim & West Bengal
Rs. 1000 p.m.
10. Any allowance in the nature of counter insurgency allowance granted to the members of armed forces operating in areas away from their permanent locations for a period of more than 30 days
Whole of India
Rs. 3900 p.m.
11. Compensatory highly active field area allowance granted to Armed forces.
Whole of India
Rs. 4200 p.m.
12.Island (duty) allowance to armed force
Andaman & Nicobar & Lakshadweep Islands
Rs. 3250 p.m.

Name of allowance	Place	Exemption
1. Any allowance (by whatever name called) granted to meet the cost of travel on tour or on transfer	Any place	To the extent of amount incurred
2. Any allowance, whether granted on tour or for journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.	Any place	To the extent of amount incurred
3. Any special compensatory allowance in the nature of special compensatory (hilly area) allowance or high altitude allowance or uncongenial climate allowance or snow bound area allowance or avalanche allowance.	a. Specified area of Manipur, Arunachal Pradesh, Sikkim, Uttar Pradesh, Himachal Pradesh, Jammu & Kashmir	Rs. 800 p.m.
	b. Siachen area of Jammu & Kashmir.	Rs.7000 p.m.
	c. All places located at a height of 1,000 meters or more above the sea level, other than places specified above.	Rs.300 p.m.
4. Any special compensatory allowance inthe nature of Border Area Allowance or Remote Locality allowance or Difficult Area Allowance or Disturbed Area Allowance.	1. Specified area of Little Andaman, Nicobar & Narcondum Islands, North and Middle Andamans, Throughout Lakshadweep Minicoy Islands, All places or north of the demarcation line, Himachal Pradesh, Mizoram, Jammu & Kashmir, UP, Sikkim	Rs.1300 p.m.
	2. Installations in the Continental Shelf of India & the Exclusive Economic Zone.	Rs.1100 p.m.
	3. Specified area of: a. Throughout Arunachal Pradesh other than areas covered by point (1) above. b. Throughout Nagaland c. South Andaman (including Port Blair) d. Throughout Lunglei District (excluding areas beyond 25 km, from Lunglei town) of Mizoram. e. Dharmanagar, Kailasahar, Amarpur and khowai inTripura. f. Jammu and Kashmir & Himachal Pradesh	Rs.1050 p.m.
	4. Specified area of Throughout Aizawal district of Mizoram, Tripura, Manipur, Himachal Pradesh, Jammu & Kashmir	Rs. 750 p.m.
	5. Jog falls in Shimoga district in Karnataka.	Rs. 300 p.m.
	6. Specified area of Himachal Pradesh, Assam & Meghalaya.	Rs. 200 p.m.
5. Tribal area / Schedule Areas / Agency Areas allowance	Specified area of (a) Madhya Pradesh; (b) Tamil Nadu; (c) Uttar Pradesh; (d) Karnataka; (e) Tripura; (f) Assam; (g) West Bengal; (h) Bihar; (i) Orissa.	Rs. 200 p.m.
6. Any allowance in the nature of high altitude granted to the member of Arm force operating in high altitude.	(a) For altitude of 9000 to 15000 ft. (b) For altitude above 15000 ft.	Rs. 1060 p.m. Rs. 1600 p.m.
7. Under Ground Allowance to an employee who is working in uncongenial, unnatural climate in under ground coal-mines.	Whole of India	Rs. 800 p.m.
8. Compensatory field Area Allowance [no exemption is available in respect of an allowance mentioned at 4 supra]	Specified area of Arunachal Pradesh, Manipur & Nagaland, Sikkim, Himachal Pradesh, Uttar Pradesh, Jammu & Kashmir	Rs. 2600 p.m.
9. Compensatory Modified field area allowance [no exemption is available in respect of an allowance mentioned at 4 supra]	Specified area of Punjab, Rajasthan, Haryana, Himachal Pradesh, Arunachal Pradesh, Assam, Mizoram, Tripura, Uttar Pradesh, Jammu & Kashmir, Sikkim & West Bengal	Rs. 1000 p.m.
10. Any allowance in the nature of counter insurgency allowance granted to the members of armed forces operating in areas away from their permanent locations for a period of more than 30 days	Whole of India	Rs. 3900 p.m.
11. Compensatory highly active field area allowance granted to Armed forces.	Whole of India	Rs. 4200 p.m.
12.Island (duty) allowance to armed force	Andaman & Nicobar & Lakshadweep Islands	Rs. 3250 p.m.