Various types of allowances

1. Allowances
Dr. P. Ravichandran
M.Com., M.B.A., M.A (Astrology)., M.Phil., Ph.D.,
D.C.P., D.L.L & A.L., P.G.D.C.A., P.G.D.P.M & I.R.,
S.B.K. College, Aruppukottai – 626101.
 9443424090 & 9080030090
 e-mail id.- prcapk@gmail.com

2. Allowances
Fixed monetary payments for a specific
purpose is known as allowance.
An allowance is a fixed monetary amount
paid by the employer to employee for
expenses related to office work.
Allowance are generally included in the
salary and taxed unless there are
exemption available.

3. Fully Taxable Allowances
 Dearness allowance (DA) (or) Dearness Pay (DP);
 City Compensatory allowance (CCA);
 Medical allowance;
 Tiffin / Lunch allowance;
 Servant allowance;
 Warden allowance and Proctor allowance;
 Non-practizing allowance;
 Family allowance;
 Deputation allowance;
 Over-time allowance;
 Hill allowance – places located at less than 1000 meter
height from sea level.

4. Fully exempted allowances
Foreign allowances.
Allowances to High Court and Supreme Court
Judges.
Allowances from United Nations Organisation
(UNO).

5. Allowances exempted up to a specified limit
1. House Rent Allowance;
2. Entertainment allowance;
3. Uniform allowance;
4. Helper allowance;
5. Academic allowance;
6. Transport allowance;
7. Hills allowance;
8. Tribal area allowance;
9. Children education allowance;
10. Children hostel allowance;
11. Underground allowance;
12. Free lunch allowance exempt
upto ₹ 50 per day.
Note: Allowances like Travelling allowance, Conveyance
allowance, Daily allowance, Helper allowance, Uniform
allowance, Research allowances are exempted u/s10(14) subject
to actual expenses incurred.

6. ALLOWANCES
Category – 1
Received
(or)
Spent
(Whichever is less)
Category – 2
Received
(or)
Limit
(Whichever is less)
Category – 3
House Rent
Allowance
(HRA)

7. Category-1 : Received (or) Spent
(whichever is less)
Conveyance allowances;
Academic allowances;
Travelling / transfer allowances;
Helper allowances;
Uniform allowances;
Daily allowances;
 Received ₹ 10,000 / Spent ₹ 8,500 /
Taxable ₹ 8,500.

8. Category 2 : Received (or) Limit
(which ever is less)
Children Education allowances :
Exempted up to ₹ 100/- per month per child
(up to maximum 2 children).
Hostel allowances :
Exempted up to ₹ 300/- per month per child
(up to maximum 2 children)
Transport allowances :
Exempted up to ₹ 1,600/- per month,
For handicapped employees - ₹ 3,200/- p.m

9. Allowances to transport employees &
Personal (Expenditure) allowance
(or) Any Running Flight allowance
The amount of exemption shall be :-
₹ 10,000/- p.m (or) 70% of such allowances
(whichever is less)
Hilly area / Border areas / Remote areas
allowances:
₹ 300 – ₹ 7,000 /- per month
Contd…

10. Tribal area allowance :
₹ 200/- per month
Under ground allowances :
These allowances are granted to employees
working in uncongenial, unnatural climate
in under-ground coal mines.
Exempt up to ₹ 800 per month.
Contd…

11. CATEGORY - 3 : HRA.
HOUSE RENT ALLOWANCE
 Least of the following shall be exempted :
 Actual amount (HRA) received;
 Rent paid less 10 % of the Salary;
 50% (or) 40% of the Salary.
Note: 50% of the Salary – if the house is located in
Delhi / Mumbai / Kolkata / Chennai)
40% of the Salary – if the house is located
elsewhere )
Salary means – Basic salary + DA (if enters) + fixed
percentage of commission on turnover

12. ENTERTAINMENT ALLOWANCE
 Entertainment allowances is first included
in income under the head Salaries and
deduction is given to Govt. Employees
only.
 Least of the following shall be exempt :
 Actual amount received;
 20% of Basic Salary;
 ₹ 5,000/-.

13. PERQUISITES
(Personal advantages)
Perquisites are benefits attached in addition
to normal salary to which an employee has
right by way of his employment.
Perquisites may be provided in cash or in kind.
Perquisites are included in salary only if they
are received by an employee from his
employer ( may be former, present or
prospective.)
Perquisites received from a person other than
employer, are taxable under the head
“PGBP” or “IFOS”.