There are various allowances exempt under Section 10 for Salaried Employees like House Rent Allowance, Leave Travel Allowance, Travelling Allowance, Uniform Allowance etc.
We have already discussed the following allowances in our previous posts and in this post we would be focusing on certain special allowances which are covered under Section 10 (14).
Special Allowances exempt under Section 10 (14)
The special allowances exempt under Section 10 (14) can be divided into 2 parts:-
- Allowances exempt under Section 10 (14)(i)
- Allowances exempt under Section 10 (14)(ii)
The total taxable salary would be computed after reducing the allowances exempt under Section 10 and the balance salary would be taxable as per the Income Tax Slabs. TDS on Salary would also be deducted and the employee can claim credit of the same at the time of filing of income tax return.
The above 2 categories of allowances exempt under Section 10 have been explained below:-
Allowances exempt under Section 10 (14)(i)
This category of allowances are exempt under Section 10 (14)(i) to the extent of the actual amount received or the amount spent for the performance of the duties of an office (whichever is less).
The following allowances are covered under this category:-
- Travelling Allowance: Any allowance granted to meet the cost of travel on tour or on transfer of duty. “Allowances granted to meet the cost of travel on transfer” includes any sum paid in connection with transfer, packaging and transportation of personal effects of such transfer.
- Daily Allowance: Any allowance, whether granted on tour or for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
- Conveyance Allowance: Any allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office or employment of profit, provided that free conveyance is not provided by the employer.
- Helper Allowance: Any allowance, by whatever name called, granted to meet the expenditure incurred on a helper where such helper is engaged for the performance of duties of an office or employment of profit.
- Academic Allowance: Any allowance, by whatever name called, granted for encouraging academic, research and training pursuits in educational and research institutions.
- Uniform Allowance: Any allowance, by whatever name called, granted to meet the expenditure incurred on the purchase or maintenance of uniform for wear during the performance of duties of an office or employment of profit.
The amount exempt for the above mentioned allowances shall be least of the following:-
- Amount received
- Amount actually spent for the performance of duty
For eg: If the Travelling Allowance received per month is Rs. 1200 and the actual amount spend is Rs. 800, only Rs. 800 would be exempted i.e least of the two.
However, in case in the above example, the Travelling allowance received was Rs. 1200 and actual amount spend was Rs. 1600, then only Rs. 1200 would be exempted i.e. least of the two.
Allowances exempt under Section 10 (14)(ii)
This category of allowances is exempt to the extent of the amount received or the limit specified (whichever is less)
The following allowances are covered under this category:-
|Type of Allowance||Allowances exempt under Section 10|
|i||Special Compensatory Allowance for Hilly Areas or High Altitude Allowance or Climate Allowance||Rs. 800 common for various areas of North East, Hilly Areas of UP, HP, J&K and Rs. 7000 pm for Siachen area of J&K and Rs. 300 common for all places at a height of 1000 mtr or more other than above places.|
|ii|| Border Area Allowance or Remote Area Allowance or a Difficult Area Allowance or Disturbed Area|
|Various Amounts ranging from Rs. 200 pm to Rs. 1300 pm are exempt for various areas specified in Rule 2BB|
|iii|| Tribal Area/ Scheduled Area/ Agency Area Allowance|
available in MP, Assam, UP, Karnataka, West Bengal,
Bihar, Orissa, Tamil Nadu, Tripura
|Rs. 200 per month|
|iv||Any allowance granted to an employee working in any transport system to meet his personal expenditure during duty performed in the course of running of such transport from one place to another.|| 70% of such allowance up to a maximum of|
Rs. 10,000 pm
|v||Children Education Allowance||Rs. 100 pm per child up to a max of 2 children|
|vi||Allowance granted to meet the Hostel expenditure on employee’s child||Rs. 300 pm per child up to a max of 2 children|
|vii||Compensatory field area allowance available in various areas of AP, Manipur, Sikkim, Nagaland, HP, UP & J&K||Rs. 2600 pm|
|viii||Compensatory modified field area allowance available in specified areas of Punjab, Rajasthan, Haryana, UP, J&K, HP, West Bengal and North East||Rs. 1000 per month|
|ix||Counter insurgency allowance to members of Armed Forces||Rs. 3900 per month|
|x||Transport Allowance granted to an employee to meet his expenditure for the purpose of commuting between place of residence and duty||Rs. 1600 per month(Increased from Rs. 800 to Rs. 1600 per month w.e.f 1st April 2015)|
|xi||Transport Allowance granted to physically disabled employee for the purpose of commuting between place of duty and residence||Rs. 1600 per month|
|xii||Underground Allowance granted to an employee working in underground mines||Rs. 800 per month|
|xiii||Special Allowance in the nature of High Altitude allowance granted to the members of Armed Forces|| Rs. 1060 pm (for altitude of 9000-15000 ft),|
Rs. 1600 pm (for altitude above 15000 ft)
|xiv||Any special allowance granted to members of the armed forces in the nature of special compensatory highly acive field area allowance||Rs. 4200 pm|
|xv||Special Allowance granted to members of armed forces in the nature of Island Duty Allowance (in Andaman & Nicobar and Lakshadweep Group of Islands)||Rs. 3250 pm|
The above allowances exempt under Section 10 (14)(ii)for Salaried Employees are exempted to the extent of amount received or the limit specified whichever is less. Actual expenditure incurred in such cases does not have any relevance.
For eg: An employee receives Rs. 1000 pm as transport allowance for commuting between the place of residence and the place of duty and the actual amount spent is Rs. 600. In such a case, the allowances exempt under Section 10 (14)(ii) would be lower of Rs. 1000 or Rs. 800 (as per table given above).
Therefore in such a case the allowances exempt under Section 10 (14)(ii) would be Rs. 800 irrespective of the fact that the actual amount spent was Rs. 600 only.
RELEVANT POINTS REGARDING ALLOWANCES EXEMPT UNDER SECTION 10
Apart from the above mentioned allowances, the following are also allowances exempt under Section 10 in hands of certain specified persons. These allowances are:-
- Allowances to a citizen of India, who is a Govt employee rendering services outside India.
- Allowances paid to High Court Judges under the High Court Judges Act.
- Sumptuary Allowance given to High Court and Supreme Court Judge
- Allowance received by an employee of UNO from his employer.
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