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Types of allowances

Pankaj Rao (4 Points)

29 September 2020

Explain the various types of allowances with tax treatment

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Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 29 September 2020

Treatment of Allowances in income tax under head Salary :

#Below is Fully Taxable :
(i) Entertainment Allowance
(ii) Dearness Allowance
(iii) Overtime Allowance
(iv) Fixed Medical Allowance
(v) City Compensatory Allowance (to meet increased cost of living in cities)
(vi) Interim Allowance
(vii) Servant Allowance
(viii) Project Allowance
(ix) Tiffin/Lunch/Dinner Allowance
(x) Any other cash allowance
(xi) Warden Allowance
(xii) Non-practicing Allowance
(xiii) Transport allowance to employee other than blind/ deaf and dumb/ orthopedically
handicapped employee

#Below is Partly Taxable (refer mentioned section for full understanding)
(i) House Rent Allowance [u/s 10(13A)]
(ii) Special Allowances [u/s 10(14)]

#Below is Fully Exempt
(i) Allowances to High Court Judges
(ii) Allowance paid by the United Nations Organization
(iii) Compensatory Allowance received by a judge
(iv) Sumptuary allowance granted to High Court or Supreme Court Judges
(v) Allowance granted to Government employees outside India.