• Sep
  • 29
  • 2012

Salary Allowances in which Exemption do Not Depend Upon Expenditure

Posted In Income Tax | , | 1 Comment » Print Friendly and PDF

 CA Aashish Ramchand

In the cases given below, the amount of exemption does not depend upon expenditure incurred by the employee. Regardless of the amount of expenditure, the allowances given below are exempt to the extent of –

1) The amount of allowance; or

2). the amount specified in rule 2BB, whichever is lower.

On the above basis, exemption is available in the case of the following allowances. It may be noted that in these cases, the amount of actual expenditure is not taken into consideration –

Name of Allowance Nature of allowance Exemption as specified in rule 2BB
Special Compensatory (Hill Areas) Allowance It includes any special compensatory allowance in the nature of special compensatory (hilly areas) allowance or high altitude allowance or uncongenial climate allowance or snow bound area allowance or avalanche allowance. Amount exempt from tax varies from Rs. 300 per month to Rs. 7,000 per month.
Border area allowance It includes any special compensatory allowance in the nature of border area allowance or remote locality allowance or difficult area allowance or disturbed are allowance. The amount of exemption varies from Rs. 200 per month to Rs. 1,300 per month
Tribal areas/scheduled areas allowance Tribal areas allowance is given in (a) Madhya Pradesh; (b) Tamil Nadu; (c) Uttar Pradesh; (d) Karnataka; (e) Tripura; (f) Assam; (g)West Bengal; (h) Bihar; (i) Orissa. Rs. 200 per month.
Allowance for transport employees It is an allowance granted to an employee working in any transport system to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided that such employee is not in receipt of daily allowance. The amount of exemption is –

  1. 70 percent of such allowance; or
  2. Rs. 10,000 per month, whichever is lower.
Children education allowance This allowance is given for children’s education. The amount exempt is limited to Rs. 100 per month per child up to a maximum of two children.
Hostel expenditure allowance This allowance is granted to an employee to meet the hostel expenditure on his child. It is exempt from tax to the extent of Rs.300 per month per child up to a maximum of two children
Compensatory field area allowance If this exemption is taken, the same employee cannot claim any exemption in respect of border area allowance mentioned above Exemption is limited to Rs. 2,600 per month in some cases.
Compensatory modified area allowance If this exemption is taken, the same employee cannot claim any exemption in respect of border area allowance mentioned above Exemption is limited to Rs. 1,000 per month in some cases.
Counter insurgency allowance It includes any special allowance in the nature of the counter- insurgency allowance granted to the members of armed forces operating in areas away from their permanent locations. If this exemption is taken, the same employee cannot claim any exemption in respect of border area allowance mentioned above. Exemption is limited to Rs. 3,900 per month in some cases.
Transport Allowance Transport allowance is 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. It is exempt up to Rs. 800 per month (Rs. 1,600 per month in the case of an employee who is blind or orthopedically handicapped).*
Undergrounded allowance Undergrounded allowance is granted to an employee who is working in uncongenial, unnatural climate in underground mines. Exemption is limited to Rs. 800 per month.
High altitude allowance It is granted to the members of armed forces operating in high altitude areas. It is exempt from tax up to Rs. 1,060 per month(for altitude of 9,000 to 15,000 feet) or Rs. 1,600 per month(for altitude above 15,000 feet
Highly active field area allowance This is special allowance is granted to the members of armed forces in the nature of special compensatory highly active field area allowance. It is exempt from tax up to Rs. 4,200 per month.
Island duty allowance This special allowance is granted to the members armed forces in the nature of island (duty) allowance in Andaman and Nicobar and Lakshadweep group of island. It is exempt up to Rs. 3,250 per month.

(Author is CA by profession &   Co-Founder of  Make My Returns (www.makemyreturns.com) & can be reached at connect@makemyreturns.com)


One Response to “Salary Allowances in which Exemption do Not Depend Upon Expenditure”

  1. Parag Shah says:

    Do we need to submit any supportings / reimbursement sheet for claiming Conveyance Allowance of Rs.800/- per month, please inform. If we required to submit the same then what kind of supportings we need to submit to claim the same.

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