In accordance Rule 2BB of in IT Rules, 1962, any allowance (by whatever name called) granted to meet the cost of travel or tour or on transfer is completely exempted from tax in the employee’s hands.
For the purposes of this clause “allowances granted to meet the cost of travel or transfer” include any sum paid in connection with the transfer, packing and transportation of personal effects on such transfer.
Under this Rule the TA granted to the employees while they travel on tour or on transfer would be completely exempted from tax, Of course, the entire amount on this account should be spent to meet the expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit.
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If an amount is saved by the employee and is deposited/invested and or is otherwise shown as such by the employee, then he would be liable to tax on the unspent amount of the allowance.
Under the same Rule 2BB another allowance which is completely exempted from tax is the daily allowance, whether granted on tour or for the period of journey in connection with travel, to meet the ordinary daily charges incurred, by the employee on account of his absence from the normal place of duty. There is no monetary limit on the exemption of this allowance but any allowance which is reasonable for the employee’s work or the employment, and which is granted to meet expenses wholly, necessarily and exclusively incurred for the purposes of the, duties of an office or employment of profit, would be exempted, provided it is actually spent by the employee concerned.
For example, if an employee is allowed 1,200 per day as daily allowance for 5 days at Mumbai while he is away from his place of duty, i.e. New Delhi in connection with official work and he spends the entire amount and gives a certificate of amount actually spent by him, the entire amount of the daily allowance of 1,200 per day, namely 6,000 daily allowance for 5 days would be completely exempted from income tax under the aforesaid Rule under Section lO(14)(i). |
