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Special Allowance

This query is : Resolved 

(Querist) 20 November 2008

Dear Sir,
Special Allowance paid along with salary for an employee. Is this exempt from Income Tax upto Rs.200/- per month (Annual Rs.2400/-) as per Section 10.
Pl clarify.
Where should this be shown in Form 16
S. Anand

Ravikumar.G (Expert) 20 November 2008

u/s 2(24) any special allowance granted to the assessee shall be treated as income.

But u/s 10(14) read with rule 2BB, any allowance granted by the employer to meet the official performance of duties and the same is expended by the employee on such duties, is exempt from tax.

S. Anand (Querist) 20 November 2008

Dear Mr. Ravikumar,
Thanks for your reply.
We have taken this amount as Special Allowance in the pay slip under the Break-up for salary. Hence it appears from your reply that it is fully taxable.
But in the IT reckoner table there is a mention that Special Allowance is exempt @ Rs.200/- per month.
Will this not be applicable for the above case. If so how should we show this exemption in Form 16.
S. Anand

B.Chackrapani Warrier (Expert) 20 November 2008

Rs.200/-as you said is for any special compensatory allowance in the nature of border area allowance,remote locality allowance or difficult area allowance or disturbed area allowance and this is covered u/s 10(14) of the income tax act,1961.

Ravikumar.G (Expert) 20 November 2008

If it is falling any of the heads mentioned in Special allowances prescribed as exempt you can consider that respective amount. Otherwise it is taxable.

B.Chackrapani Warrier (Expert) 20 November 2008

Rs.200/- is also allowed for special compensatory (tribal areas/schedule areas/agency areas)allowance for places in states like MP,CHENNAI,UP,KARNATAKA,TRIPURA,ASSAM,WEST BENGAL,BIHAR AND ORISSA.

S. Anand (Querist) 20 November 2008

Dear Sirs,
Since the salary for us is processed in chennai for employees in Chennai, I can take Rs.200/- per month as exemption under special allowance u/s 10(14).
The same will be reflected in Form 16 under Section 10 exemptions.
Am I right.
Pl advise.
S. Anand

SANDEEP AGGARWAL (Expert) 20 November 2008

No, This allowance is taxable. it can be exempt if it is transport allowance(Rs 800/- PM for tpt between ofice to residence) or if it is children edu. all(Upto 100/- per child pm for max. 2 child. In your case it is taxale allowance.

CA. Sandep aggarwal

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