These allowances are given to meet employee's expenses incurred while performing his official work or duties and in case any part of these allowances is saved, then the same shall be taxable in the hands of an employee.
So, exemption shall be the least of following two amounts:
(a) The amount of the allowance received.
(b) The amount actually spent by the employee for the purpose for which the allowance is given.
Following are the prescribed allowances for the purpose of section 10(14)(i):
(i) Helper Allowance: It is exempted upto actual amount spent on engaging a helper required to perform the official duties. Excess, if any, will be taxable.
(ii) Uniform Allowance: It is also exempted upto actual expenditure incurred on acquiring or maintaining of the official uniform. Excess, if any, will be taxable.
(iii) Academic Research Allowance: It is exempted upto actual expenditure incurred for research. Excess, if any, is taxable.
(iv) 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.
(v)Travelling or Transfer Allowance: It is exempted upto actual expenditure incurred for the purposes of employment. Excess, if any, will be taxable. Any allowance granted to meet the cost of travel on tour or on transfer shall be exempted.
(vi) Daily Allowance: 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 (vi) are exempt upto the amount spent by the employee for the purpose for which these allowance are given to the employee.
Following are the allowances for the purposes of Section 10(14)(iii) along with prescribed amount of exemption:
(i) 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 Rs. 300 p.m. to Rs. 7,000 p.m.
(ii) Any Special Compensatory Allowance in the nature of Border Area Allowance/Remote Area Allowance/Difficult Area Allowance/Disturbed Area Allowance:
Exemption allowed upto Rs. 200 p.m. to Rs. 1,300 p.m.
(iii) Compensatory Field Area Allowance:
Exemption allowed upto Rs. 2,600 p.m.
(iv) Compensatory Modified Field Area Allowance:
Exemption allowed upto Rs. 1,000 p.m.
(v) Counter Insurgency Allowance/Compensatory Field Area Allowance:
Exemption allowed upto Rs. 3,900 p.m.
(vi) Highly Active Field Area Allowance:
Exemption allowed upto Rs. 4,200 p.m.
(vii) Underground Allowance given to coal mine workers:
Exemption allowed upto Rs. 800 p.m.
(viii) Island Duty Allowance given to Armed Forces posted in Andaman & Nicobar and Lakshadweep group of islands:
Exemption allowed upto Rs. 3,250 p.m.
(ix) Allowance given to retired Chairman and members of UPSC
An allowance given for getting the service of an orderly and for getting services of secretarial assistance on contract basis or 14,000 per month, whichever is less, is exempt
(x) Transport Allowance for Specified Handicapped Employees:
With effect from Assessment Year 2019-20, the exemption regarding transport allowance has been discontinued for normal employees. However, the exemption shall continue to be allowed @3,200 p.m. to employees who are blind/deaf or dumb or orthopedically handicapped or. disability of lower extremities.
(xi) Tribal Area Allowance:
This allowance is exempted upto Rs. 200 p.m. in the States of Madhya Pradesh, Tamil Nadu, Uttar Pradesh, Karnataka, Tripura, Assam, West Bengal, Bihar and Orissa.
(xii) Any Running Flight Allowance:
It is 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.
This allowance is exempted upto 70% of such allowance or 10,000 p.m. whichever is less.
(xiii) High Altitude Allowance:
This type of allowance is given to armed forces operating in high altitude areas. It is exempted as under:
- Altitude of 9,000-15,000 feet: upto 1,060 p.m.
- Altitude above 15,000 feet: upto 1,600 p.m.
(xiv) 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 Rs. 100 p.m. per child for two children only.
- 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.
- Child include both major or minor child.
- Exemption shall be allowed irrespective of the actual expenditure incurred by the employee on the education of the children.
- 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.
(xv) Hostel Expenditure Allowance: Any allowance granted by employer to meet the hostel expenditure of employees' children it shall be exempted upto Rs. 300 p.m. for per child maximum for two children only.
xvi) 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 Rs. 3,900 p.m.
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