ALLOWANCES [Section-10]- For Computing ‘Salary’ Income

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

 
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More Topics .... @ SALARY
Salary-Definition & Meaning

Computation of Salary Income

Definition of Word ‘Salary’ [ Section 17(1)]

Section-15 : List of Incomes Chargeable to Income Tax under the head ‘ SALARIES’

Important Points / Characteristics for Computing Salary Income

Provident Fund

Treatment of Provident Funds (PF) for Computing Salary Income

Taxable Portion of annual accretion to RPF [Section 17(1)(vii)]. for Computing Salary Income

Transferred Balance from URPF to RPF [Section 17(1)(vii] for Computing Salary Income

Refund from Provident Fund [Section 17(3)(ii)] for Computing Salary Income

New Pension Scheme [ NPS] for Central Government and other Employees joining new jobs on or after 1-1-2004 for Computing Salary Income

Allowance [ Section 17(3)]

Allowance [ Section 17(3)] – for Computing ‘Salary’ Income

Fully Exempted Allowances for Computing ‘Salary’ Income

Fully Taxable Allowances for Computing ‘Salary’ Income

House Rent Allowance (HRA) for Computing ‘Salary’ Income

Allowances covered u/s 10 (14) for Computing ‘Salary’ Income

Meaning Of Salary For Different Purposes
PERQUISITES [Section 17(2)]

Meaning and Types of Perquisites [ Section 17(2)]

Taxability of Perquisites for Computing Salary Income

Perks Exempted From Tax for all Employees and not added in Salary Income

Rent Free House [Section 17(2)(i) Rule 3(1)]

Rules Regarding Calculation Of Value Of Rent Free House

Valuation Of Rent Free Accomodation (Unfurnished & Furnished)

Valuation of Rent Free Accommodation Provided as Concessional Rent [Sec. 17(2)ii)]

Obligation of Employee of Rent Free House met by Employer [Section 17(2)(iv)]

Sum payable by the Employer directly or through a fund to effect an assurance / an annuity [Section 17(2)(v)]

Any specified security or sweat equity shares allotted or transferred to employee [Section 17(2)(vi)] [ w.e.f. 1-4-2009]

Contribution to an Approved Superannuation Fund by the Employer [Sec. 17(2)(vii)]

Interest free or Concessional loan from employer [Rule 3(7)(i)]

Valuation of Perk in respect of Travelling, Touring, Accommodation

Food or Beverages Facility by Employer to Employee

Valuation of Perquisite in respect of Gift Voucher or Token

Valuation of Perquisite in respect of Credit Card

Valuation of Perquisite in respect of Club Facility

Use of Moveable Assets by Employer to Employee

Transfer Of Moveable Assets to the employee

Meaning of Specified Employee for Taxable Perquisites [Section 17(2)(iii) Rule 3]

Valuation of Perquisite of Motor Car or any Other Automotive Conveyance [Rule 3(2)]

Perquisite of Free domestic servants [Rule 3(3)]

Perquisite in respect of free supply of gas, electric energy, water supply [Rule 3(4)]

Free Educational Facilities to Children of Employee’s Household [Rule 3(5)]

Facility of Free or Concessional Private Journey to an employee by the employer engaged in the carriage of passengers or goods [Rule 3(6)]
PROFITS IN LIEU OF SALARY [17(3)]

Receipts treated as Profit in Lieu of Salary [ Section 17(3)]

Leave Travel Concessional (LTC) Assistance [Section 10(5)]

Death-Cum-Retirement Gratuity [Section 10(10)]

Non-Government employees receiving gratuity under payment of Gratuity Act, 1972 [POGA]

Non-Government Employees receiving gratuity (Not covered under payment of Gratuity Act)

PENSION [Monthly and Commuted] for Computing Salary Income

Leave Encashment [Section 10(10AA)] for Computing Salary Income

Any amount received as compensation on termination of employment [Section-10B]

Any amount received on voluntary retirement [Section 10(10C)]

Payment received from Recognised Provident Fund [Section 10(12)]

Any payment from Superannuation Fund [Section 10(13)]

DEDUCTIONS OUT OF GROSS SALARY [ Section-16]

Entertainment Allowance to Government Employees [Section-16(ii)]

Tax on Employment Under Section - 16(iii)

 
DEDUCTIONS U/S 80C OUT OF GROSS TOTAL INCOME

Section - 80C : Deductions from Gross Total Income (GTI) in case of Individual and HUF

Qualifying Amount ( Q.A.) for Deduction U/s 80C

 
 
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