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Allowance Covered U/s 10(14) for Computing Salary Income

Following are the prescribed allowances for the purpose of section 10(14) and their respective treatment in computing the income under the head Salaries

  1. Helper Allowance. It is exempted upto actual amount spent on engaging a helper required to perform the official duties.

  2. Uniform Allowance. It is also exempted upto actual expenditure incurred on acquiring or maintaining of the official uniform. Excess, if any, will be taxable.

  3. Academic Research Allowance. It is exempted upto actual expenditure incurred for research. Excess, if any, is taxable.

  4. Conveyance Allowance. It is exempted upto actual expenditure incurred in performance of official duties. In case amount received is more than actual expenditure, excess, if any, will be taxable.

  5. Travelling, Transfer or Daily Allowance. It is exempted upto actual expenditure incurred for the purposes of employment. Excess, if any, will be taxable.

Any allowance by whatever name it may be called) granted to meet the cost of travel on tour or on transfer shall be exempted. Any allowance whether granted to employee (while on tour or for the period of journey in connection with transfer) to meet the ordinary daily charges incurred by such employee on account of absence from his normal place of employment shall also be exempted.

Such allowance shall include any sum paid in connection with transfer, packing and transportation of personal effects on such transfer.

Allowances mentioned in point (i) to (v) are exempt upto the amount spent by the employee for the purpose for which these allowance are given to the employee.

So, exemption shall be the least of following two amounts—

  1. The amount of the allowance received.

  2. The amount actually spent by the employee for the purpose for which the allowance is given.

This clearly means that these allowances are given to meet employee’s expenses incurred in performance of his official work or duties and in case any part of these allowances is saved, then the same shall be taxable.

6. Any special allowance in the nature of Composite Hill Compensatory Allowance / High Altitude Allowance / Uncongenial Climate Allowance / Snow Bound Area Allowance! Avalanche Allowance :

Exemption allowed upto ` 300 p.m. to ` 7,000 p.m.

7. Any Special Compensatory Allowance in the nature of Border Area Allowance / Remote Area Allowance / Difficult Area Allowance/Disturbed Area Allowance

Exemption allowed upto ` 200 p.m. to ` 1,300 p.m.

8. Compensatory Field Area Allowance

Exemption allowed upto ` 2,600 p.m.

9. Compensatory Modified Field Area Allowance

Exemption allowed upto ` 1,000 p.m.

10. Counter Insurgency Allowance/Compensatory Field Area Allowance

Exemption allowed upto ` 3,900 p.m.

11. Highly Active Field Area Allowance

Exemption allowed upto ` 4,200 p.m.

12. Underground Allowance given to coal mine workers

Exemption allowed upto ` 800 p.m.

13. Island Duty Allowance given to Armed Forces posted in Andaman & Nicobar and Lakshdweep group of islands

Exemption allowed upto ` 3,250 p.m.

14. Transport Allowance. As per the recommendations of 5th Pay Commission, the Central Government has allowed transport allowance to its employees. As per orders any allowance given with effect from 1-8-1997 under the name of Transport Allowance to any employee whether govt. or private shall be exempted upto ` 800 p.m. Excess, if any, shall be taxable. But in case of handicapped with disability of lower extremities or a blind employee it shall be exempted upto ` 1,600 p.m.

15. Tribal Area Allowance. This allowance is exempted upto ` 200 p.m. in the States of Madhya Pradesh, Tamil Nadu, Uttar Pradesh, Karnataka, Tripura, Assam, West Bengal, Bihar and Orissa.

16. Any Running Flight Allowance, granted to an employee of transport system to meet his personal expenditure during the duty performed in the course of running of such transport from one place to another place provided that such employee is not in receipt of daily allowance it is exempted upto 70% of such allowance or  ` 10,000 p.m. whichever is less.

17. Children Education Allowance. If any amount is given by employer to employee as education allowance for the education of own children in India, it shall be exempted upto 100 p.m. per child for two children only.

Important Notes

    1. Exemption is allowed for any two children of the employee. The term ‘child’ includes all the legal children including a step child and a legally adopted child but does not include grand children.

    2. Child include both major or minor child.

    3. Exemption shall be allowed irrespective of the actual expenditure incurred by the employee on the education of the children.

    4. In case employee is getting both education as well as hostel allowance; he is allowed separate exemption for education and hostel allowance but for only two children.

    18. Hostel Expenditure Allowance. Any allowance grante/d by employer to meet the hostel expenditure of employees’ children it shall be exempted upto ` 300 p.m. for per child maximum for two children only.

    19. Any Special Allowance. In the nature of counter insurgency allowance given to the members of the armed forces operating in areas away from their permanent locations for a period of more than 30 days shall be exempted upto ` 1,300 p.m.

 
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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