Salary Allowances Exempt under Section 10 Allowances are specific amounts paid by the employer to meet specific expenditures. All allowances are taxable except those, which are specifically exempt under section 10. Topics Covered in this Page
Any allowance paid or allowed outside India by the Government to a citizen of India for rendering service outside India is exempt from Salary Tax. Go to Top
Allowance granted by the employer for payment of rent in respect of a residential accommodation occupied by the assessee is exempt from Salary Tax as given below. 1. In case the accommodation is situated in Metropolitan Cities (Chennai, Delhi, Mumbai, Kolkatta) Least of the following is exempt: - | a. | Rent Incurred | xxx | | | Less: 10% of the Salary | xxx
--- | | | | | xxx | | b. | 50% of Salary | | xxx | | c. | Allowance actually received | | xxx | 2. In case the accommodation is situated in any other place Least of the following is exempt: - | a. | Rent Incurred | xxx | | | Less: 10% of the Salary | xxx
--- | | | | | xxx | | b. | 40% of Salary | | xxx | | c. | Allowance actually received | | xxx |
For this purpose, Salary = Basic Pay + Dearness Allowance + Commission as a Fixed Percentage on Turnover. However, salary is to be computed only for the period during which the accommodation concerned was occupied by the assessee. Go to Top
Allowances granted to meet expenses incurred in the performance of duties of an office is exempt from Salary Tax as given below. - Cost of travel on tour or on transfer
- 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 expenditure (provided no free conveyance is provided by the employer)
- Expenditure incurred on helper engaged in the performance of duties of office or employment of profit
- Encouraging academic, research and training pursuits in educational and research institutions
- Expenditure incurred on the purchase or maintenance of uniform for wear during the performance of duties of an office or employment of profit
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| S.No | Nature of Salary Allowance | Extent to which the Salary Allowances are Exempt | | 1 | Hilly Area Allowance, Border Area Allowance, Remote Area Allowance, Disturbed Area Allowance, Field Area Allowance, Modified Field Area Allowance and Tribal Area Allowance. | Ranging from Rs.200 p.m. to Rs.7,000 p.m. | Mostly these allowances relate to a particular village/town or location. However, the following two are general in nature applicable all over India: - | Hilly Area Allowance - All places located at a height of 1,000 metres or more above the sea level. | Rs.300 p.m. | Border Area Allowance - Installations in the Continental Shelf of India and Exclusive Economic Zone of India. | Rs.1,100 p.m. | | 2 | Any salary allowances granted to an employee working in any transport system to meet his personal expenditure during his duty performed in the course of running such transport from one place to another place, provided that such employee is not in receipt of daily allowance | 70% of such allowance or Rs.6,000 p.m. whichever is lower. | | 3 | Children Education Allowance (for a maximum of two children) | Rs.100 p.m. per child | | 4 | Children Hostel Allowance (for a maximum of two children) | Rs.300 p.m. per child | | 5 | Transport Allowance granted to an employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty: - | Employee, being a blind person or orthopedically handicapped with disability of lower extremities | Rs.1,600 p.m. | Other Employees | Rs.800 p.m. | | 6 | Underground salary allowances to an employee working in Uncongenial, Unnatural climate in Underground Coal Mines | Rs.800 p.m. | | 7 | High Altitude (uncongenial climate) allowance given to members of armed forces operating in high altitude areas: - | For altitude of 9,000 to 15,000 feet | Rs.1,060 p.m. | For altitude above 15,000 feet | Rs.1,600 p.m. | | 8 | Highly active field area allowance granted to the members of armed forces | Rs.4,200 p.m. | | 9 | Counter-insurgency allowance granted to members of armed forces operating in the areas away from their permanent locations for a period of more than 30 days. | Rs.3,900 p.m. | | 10 | Island (duty) allowance to members of the armed forces working in Andaman & Nicobar and Lakshwadeep Group of Islands | Rs.3,250 p.m. |
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