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Taxability of DAILY ALLOWANCES ???

CourseCart.in (Mentor at SHAYVIDZ Academy) (3756 Points)

14 September 2010

Dear All,

One of my client company is giving Daily Allowances, to Sales Officers, for FOODING & INCIDENTAL EXPENSES e.g. tea exp etc.

This allowance is FIXED on PER DAY basis.

e.g. if duty is performed IN THE CITY OF HEADQUARTER, then 200/- per day Daily Allowance. and if duty is performed OUTSIDE THE CITY OF HEADQUARTER, then 400/- per day Daily Allowance.

NO BILLS ARE SUBMITTED TO THE COMPANY FROM THE EMPLOYEE.

QUESTION : - Will the above mentioned DAILY ALLOWANCES are taxable in the hand's of EMPLOYEE ?

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7 Replies

JINESH SHAH (PRACTICING CA) (151 Points)
Replied 14 September 2010

it will be exempted to the extent of expenses incurred & remaining will be taxable

Pranav Chawla (article assistant) (56 Points)
Replied 14 September 2010

daily allowances are exempt us 10(14) of the lower of the following:-

a)amt utilised for official purposes.

b)amt of allowance

also its always the duty of the assesee to prove that he can claim exemption ander any sec so he shall make a record of expenses

CourseCart.in (Mentor at SHAYVIDZ Academy) (3756 Points)
Replied 15 September 2010

Dear Jinesh & Pranav,

Thanks for reply.. but I have already told you very clearly that NO BILLS OF EXPENSES ARE SUBMITTED & its not cost effective for the company to verify such bills of very small amount.. Think little bit practically..

As per my understanding, this will be fully taxable in the hands of employee becoz no bills are available of actual expenditure..

CA.G.Muguntha Narayanan (Internal Auditor at TVS Motors) (2195 Points)
Replied 15 September 2010

Dear Adarsh,

I dont think I.T. Act has prescribed the ways in which u can prove an expenditure to be official. When the act is silent, interpretation cannot be made that bills are necessary for getting the allowance. So, u can claim the actual expenditure as an allowance. In the case of assessment, the A.O. will give due importance to the circumstances and allow u deduction, even on the non-availability of bills

Kamal Jain (FCA) (200 Points)
Replied 15 September 2010

Fully taxable in the hands of employees because its allowance by name itself.

Daily 'Allowances'

NO BILLS ARE SUBMITTED TO THE COMPANY FROM THE EMPLOYEE

Rahul Ramesh (CA Final, BCom, MBA) (1084 Points)
Replied 15 September 2010

Employee can avail exemption u/s 10(14)(ii)

As per section 10(14)(ii)

any such allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit² are ordinarily performed by him or at the place where he ordinarily resides, or to compensate him for the increased cost of living,