Share |

Allowances Under Section-10 & Section-17(3) under Head 'Salary' Income

 A.    Allowances [Section-10 ]

4.

10(13A) read with Rule 2A

House rent allowance

Least of the following is exempt:

a) Actual HRA Received

b) 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Chennai)

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. 08 /2013 dated 10-10-2013].

5.

10(14)

Children education allowance

Up to Rs. 100 per month per child up to a maximum of 2 children is exempt

6.

10(14)

Hostel expenditure allowance

Up to Rs. 300 per month per child up to a maximum of 2 children is exempt

7.

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. 3200 per month for blind and handicapped employees) is exempt

8.

Sec. 10(14)

Allowance granted 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

b) Rs. 10,000 per month.

9.

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 for official purposes

10.

10(14)

Travelling allowance to meet the cost of travel on tour or on transfer

Exempt to the extent of expenditure incurred for official purposes

11.

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 for official purposes

12.

10(14)

Helper/Assistant allowance

Exempt to the extent of expenditure incurred for official purposes

13.

10(14)

Research allowance granted for encouraging the academic research and other professional pursuits

Exempt to the extent of expenditure incurred for official purposes

14.

10(14)

Uniform allowance

Exempt to the extent of expenditure incurred for official purposes

15.

10(7)

Any allowance or perquisite paid or allowed by Government to its employees (an Indian citizen) posted outside India

Fully Exempt

16.

-

Allowances to Judges of High Court/Supreme Court (Subject to certain conditions)

Fully Exempt.

17.

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

18.

-

Allowances paid by the UNO to its employees

Fully Exempt

19.

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 the services of an orderly and for meeting expenses incurred towards secretarial assistant on contract basis.

20.

Sec. 10(14) read with Rule 2BB

Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations)

Amount exempt from tax varies from Rs. 300 to Rs. 7,000 per month.

21.

Sec. 10(14) read with Rule 2BB

Border area, Remote Locality or Disturbed Area or Difficult Area Allowance (Subject to certain conditions and locations)

Amount exempt from tax varies from Rs. 200 to Rs. 1,300 per month.

22.

Sec. 10(14) read with Rule 2BB

Tribal area allowance in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Orissa

Up to Rs. 200 per month is exempt

23.

Sec. 10(14) read with Rule 2BB

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)

Up to Rs. 2,600 per month is exempt

24.

Sec. 10(14) read with Rule 2BB

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)

Up to Rs. 1,000 per month is exempt

25.

Sec. 10(14) read with Rule 2BB

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)

Up to Rs. 3,900 per month is exempt

26.

Sec. 10(14) read with Rule 2BB

Underground Allowance to employees working in uncongenial, unnatural climate in underground mines

Up to Rs. 800 per month is exempt

27.

Sec. 10(14) read with Rule 2BB

High Altitude Allowance 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) is exempt

b) Up to Rs. 1,600 per month (for altitude above 15,000 feet) is exempt

28.

Sec. 10(14) read with Rule 2BB

Highly active field area allowance granted to members of armed forces (Subject to certain conditions and locations)

Up to Rs. 4,200 per month is exempt

29.

Sec. 10(14) read with Rule 2BB

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 is exempt

30.

10(14)

City Compensatory Allowance

Fully Taxable

31.

10(14)

Fixed Medical Allowance

Fully Taxable

32.

10(14)

Tiffin, Lunch, Dinner or Refreshment Allowance

Fully Taxable

33.

10(14)

Servant Allowance

Fully Taxable

34.

10(14)

Project Allowance

Fully Taxable

35.

10(14)

Overtime Allowance

Fully Taxable

36.

10(14)

Telephone Allowance

Fully Taxable

37.

10(14)

Holiday Allowance

Fully Taxable

38.

10(14)

Any Other Cash Allowance

Fully Taxable

 

1.3.      ALLOWANCES [ Section 17(3)]

The term Allowance has been derived from the word ‘to allow’ . As per Oxford Dictionary the word ‘Allowance’ means “any amount or sum allowed regularly”. As such allowances are given in cash along with salary by the employer. These are divided into three categories on the basis of their tax treatment . these are :

Fully Exempted

Fully Taxable

Partially Taxable

1. Foreign Allowance only in case of Govt. employees posted outside India.

1. Dearness Allowance Additional D.A. High Cost of Living allowance
2. City Compensation Allowance
3. Capital Compensatory Allowance
4. Lunch Allowance
5. Tiffin Allowance
6. Marriage Allowance
7. Family Allowance
8. Deputation Allowance
9. Warden ship Allowance
10. Non participating Allowance
11. Project Allowance
12. Overtime Allowance
13. Fixed Medical Allowance
14. Entertainment Allowance
15. Water and Electricity Allowance

1. Hose Rene Allowance
2. Allowance covered u/s10(14) :
i. Helper Allowance
ii. Uniform Allowance
iii. Academic Allowance
iv. Conveyance Allowance
v. Traveling Allowance
vi. Any special allowance in the nature of Composite Hill compensatory Allowance or High Altitude Allowance etc.
vii. Any compensatory Allowance in the nature of Border area or remote area or difficult area or disturbed area Allowance.
viii. Transport Allowance
ix. Tribal Area Allowance
x. Running Allowance given to employees of Transport Sector.
xi. Children Education Allowance
xii. Hostel Expenditure Allowance
xiii. Compensatory Field Area Allowance
xiv. Compensatory Modified Field Area Allowance.

1.3.1.   IN CASE OF FOLLOWING SPECIAL ALLOWANCES AMOUNT OF EXEMPTION IS AMOUNT OF EXPENDITURE INCURRED :

Name of Allowance (THAR DUCT)

Exemption  Allowed

Transfer Allowance

Exemption allowed is amount of expenditure incurred for official purpose or for specified purpose (it means if expenditure is incurred personal purpose or is incurred for specified purpose, then such expenditure incurred or saved is taxable.

Academic Allowance ( granted to employee for higher studies)

Research and Development Allowance ( R & D)

Daily Allowance ( where employee is sent for official work outside the city limits – fooding etc.

Uniform Allowance

Conveyance Allowance (within city limit)

Traveling Allowance ( outside city limit)

1.3.2.   HOUSE RENT ALLOWANCE(HRA)

HRA Exemption in respect of House Rent Allowance regulated by Rule 2A. For purposes qualifying the exemption, the place where the residential accommodation is situated is divided into :

(i)  Major Cities (Bombay, Calcutta, Delhi and Madras), and

(ii)  Other Places.

The amount exempt will be the least of the following :

MAJOR CITIES                                                   OTHER PLACES

>> Allowance actually received                        >> Allowance actually received

>> Rent paid in excess of 10%                        >> Rent paid in excess of 10% of Salary.
of Salary.

>>50% of Salary                                              >> 40% of Salary

ILLUSTRATION
An employee working in Bombay is in receipt of House Rent Allowance of Rs.1,250 p.m. He is occupying a residential accommodation, for which rent paid by him is Rs.2,000 .He is getting a salary of Rs.3,500 p.m. and dearness allowance  of Rs. 1,000 p.m. which counts for retirement benefits.

he exemption will be worked out as follows :

  1. House Rent Allowance received for the year           Rs.15,000(A)

  2. Rent paid less 10% of salary including

Dearness Allowance Rs.24,000 minus
(54,000 X 10)/100 =                                               Rs.18,600(B)

  1. 50% of Salary                                            Rs.27,000(C)

Exemption admissible (least of A,B and C)   Rs.15,000

 
MORE TOPICS ...
Allowances Under Section-10 & 17(3) under Head 'Salary' Income
Chart Showing Computation of 'Salary' Income
Computation of 'Gross Salary' Income
Computation of 'Net Salary' Income :
Deduction under Chapter VI-A

Retirement Benefits

1.       Major Retirement benefits gets by the Employee

2.       Tax Treatment of ‘Leave Encashment’

3.       Tax Treatment of ‘Gratuity’

4.       Tax Treatment of ‘Pension’
Other Benefits & Facilities gets by the Salaried Employees
Arrear of Salary and relief under section 89(1)
Deduction Under Section 80 C ( How to Find Out)
Exemption Specified in Income Tax Rules in 'Salary' Income
'Perquisies' and 'Income Tax - ( Taxable and Exempted) - Salary :
Computation of 'Profit in Lieu of Salary' (Sec-17(3)
Computation of Income Under Head 'Salaries' under Income Tax
 

 
Get Updated ....
Tax Tutorials
E-Payment Of Direct Taxes
Filing Of Return Of Income
Interest for Delay in Filing the Return of Income [Section 234 A]
Interest for default in Payment of Advance Tax [Section 234B]
Provisions Of 'Income-Tax Law' Useful For Non-Residents
MAT (Minimum Alternate Tax)
AMT ( Alternative Minimum Tax)
Tax On Long-Term Capital Gains (LTCG)
Tax On Short-Term Capital Gains (STCG)
Exemption[ Section-54] For Capital Gains Arising On Transfer Of Residential House Property
Tax Treatment Of Gifts Received By An Individual Or HUF
Set Off And Carry Forward Of Loss Under The Income-Tax Act
Interest For Delay In Payment of TDS/TCS And For Non-Payment Of Tax Demanded
Tax Deduction/Collection Account Number (TAN)
How to apply for PAN ?
Refund Of Excess Tax Paid By The Taxpayer (Sections - 237 to 245 )
Presumptive Taxation Scheme of Section 44AD
Presumptive Taxation Scheme of Section 44ADA
Presumptive Taxation Scheme of Section 44AE
Deduction in respect of Life Insurance Premium, PPF, NSC, etc. [Section 80C]
Deduction in respect of Medical Insurance Premium [Section 80D]
Tax Deducted at Source (TDS) from Interest, other than Interest on Securities (Section-194A)
Tax Deducted at Source (TDS) from Interest on Securities (Section 193)
Late Filing Fees And Penalty For Failure To Furnish/Delay In Furnishing The TDS/TCS Statements
LIBRARY @ Tax Management
TAX & INVESTMENT GUIDE FOR "NRI"- Non-Resident Indians !
GUIDE & FAQ @ TAX
GRAPHICAL PRESENTATION @ TAX
TIPS & TRICKS @ TAX
MANAGERIAL & FINANCIAL DECISIONS @ TAX
5 GOLDEN RULES OF TAX PLANNING
FAMILY TAX PLANNING
DEDUCTIONS FROM YOUR INCOME
EXEMPTED INCOMES
HUF - FORMATION, MANAGEMENT & TAX PLANNING
COMPUTATION OF GROSS TOAL INCOME
INCOME TAX @ GLANCE
MULTIPLE KNOWLEDGEBASE ON TAX
51 TIPS ON TAX PLANNING
APPEALS UNDER INCOME TAX
ASSESSMENTS
PENALTIES UNDER IT DEPATMENTS
TAX SAVING SCHEMES
TAX READY RECKONER
TAX RATES
PROSECUTIONS UNDER INCOME TAX DEPARTMENT
TAXATION SYSTEM IN INDIA
CHARITABLE & RELIGIOUS TRUST - TAXATION
PRESCRIBED FORMS WITH with Section / Rules
KNOWLEDGE BASE !
New Topics @ Tax KnowledgeBase...
 
 

Most Popular Topics :

Corporate Tax ( Taxation in Companies)
FAQ on TDS on Salaries
FAQ on Taxable Income
FAQ on Filing of Income Tax Return
Graphical Chat Presentation of Provision of Motor Car / Other Vehicles [Rule 3(2)(A)&(B)]
'Appeals' Under Income Tax Act. 1961.
'Assessments' Under Income Tax Act. 1961.
List of Exempted Incomes (Tax-Free) Under Section-10
Income Under the Head ' Business and Professions' [Section 28 to 44]
Income Under the Head ' Capital Gain'
Income Under the Head ' House Property '[Section- 22 - 25 ]
Income Under the Head "Salary"
[Section 15-17]
Income Tax on 'Partnership Firms'
PENALTIES Under Income Tax Act. 1961.
Tax Saving Schemes for Individual -Instant Guide
New Tax Rates For FY 2017-18 & AY 2018-19
"Exempted Incomes" under Income Tax Act.
Charitable & Religious Trust :Formation, Registration, & Taxation
Hindu Undivided Family [HUF] - Formation, Management and Taxation
 

Most Popular Links :

Clubing of Income Deduction U/s 80C
Allowances Us-17(3) Exemption-Salary
Tax Amendment-2015 Taxable Income
Clubing of Income Tax Deductions
HUF Deduction HUF Investment
Gift by HUF HUF Tax Planning Tips
Tax Saving Schemes Tax Planning Tips
Refund of Tax Fringe Benefit Tax-FBT
Return Filing Assessment / Scrutiny
Notice from I.T. Dept. Incomes Types @ TDS
Exemptions-Tax Returns “Summon” U/s 131
'Black Money' @ I.Tax Big Gifts To Be Taxed
'Appeals' under I.Tax Assessment @ I.Tax
Exempted Incomes Capital Gain
Business & Professions House Property
Salaries @ I.Tax Partnership Firm
'Penalty' under I.Tax Act. Tax Ready Reckoner
Charitable Trust Useful Links @ I.Tax
 
Guide & FAQ on Tax Knowledgebase @ Taxation Income Tax @ Glance HUF - Formation, Planning & Taxation
Charitable & Religious TRUST NRI (Tax Planning,Saving,Investemnt) Budget 2017-2018 GST (FAQ, Law, Act. Rules, Schedule, Enrollment)
FAQs - Income Tax India Tax Tutorials    

Disclaimer:
All efforts are made to keep the content of this site correct and up-to-date. But, this site does not make any claim regarding the information provided on its pages as correct and up-to-date. The contents of this site cannot be treated or interpreted as a statement of law. In case, any loss or damage is caused to any person due to his/her treating or interpreting the contents of this site or any part thereof as correct, complete and up-to-date statement of law out of ignorance or otherwise, this site will not be liable in any manner whatsoever for such loss or damage.

The visitors may click here to visit the web site of Income Tax Department for resolving their doubts or for clarifications