Axability of special allowance paid to employees for serving

Query: Taxability of Special Allowance Paid to Employees for Serving in the difficult and  Far Flung areas

             In one of our company project site located in Chamoli district of Uttarkhand, one special allowance @ 10% of Basic Pay (Variable) is being introduced to be paid to employees posted in Project site for Serving in the difficult and Far Flung areas.

              Prior to this special allowance, a fixed Remote allowance of Rs 1300 per month was being paid to employees which was exempt from tax under section 10(14) (ii) being the area i.e Chamoli district specified in rule 2 BB of the Income Tax Act 1961.The same shall be discontinued upon introduction of above special allowance.

            The special allowance allowance is recently being introduced to be paid to Central Public Sector enterprise employees (CPSEs) for serving in the difficult and far flung areas in pursuance of Department of Public Enterprises (DPE) guidelines issued vide OM dated 22.06.2010(Refer DPE website for more details )

Whether the special allowance @ 10% of Basic Pay (Variable) will cover under section 10(14) (ii) or any other sections of the Income tax Act and will be exempt from tax to the tune of Rs 1300 per month or will be fully taxable or fully exempt or partly exempt from Income Tax.

                                                 If partly exempt then what will be the amount of exemption available to this allowance.

                                                 Kindly advice