Rule 280 of the Draft Income-tax Rules, 2026 prescribes allowances for the purposes of Schedule III (Table Sl. No. 12 and 13) and specifies the conditions and limits for exemption from inclusion in total income. For Schedule III (Table Sl. No. 12), prescribed allowances include amounts granted to meet travel expenses on tour or transfer, expenses related to packing and transportation of personal effects during transfer, daily charges during journeys away from the normal place of duty, conveyance expenses where free transport is not provided, expenses incurred for engaging a helper for official duties, allowances promoting academic, research, and training activities in educational institutions, and expenses for purchase or maintenance of uniforms required for official duties. For Schedule III (Table Sl. No. 13), the rule lists various allowances and the extent of exemption, including Special Compensatory (Remote Locality) Allowances for tough locations at rates such as ₹7,000, ₹4,500, and ₹1,500 per month depending on location categories. It also specifies compensatory field area allowance of ₹13,500 per month and modified field area allowance of ₹8,000 per month for specified regions. Other allowances include transport system allowances up to 70% of the amount subject to a limit of ₹25,000 per month, children education allowance of ₹3,000 per month per child for up to two children, hostel allowance of ₹9,000 per month per child, counter-insurgency allowance of ₹22,000 per month, transport allowance for disabled employees, high altitude allowances for armed forces personnel, underground mine allowances, island duty allowances, and Siachen allowance of ₹42,500 per month. The rule further provides that employees opting for the tax regime under section 202(4) can claim exemption only for specified allowances listed in sub-rule (1)(a) to (d) and transport allowance under Table Sl. No. 10, subject to prescribed conditions.
Extract of Rule No. 280 of Draft Income-tax Rules, 2026
Rule 280
Prescribed allowances for the purposes of Schedule III (Table: Sl No. 12 & 13)
(1) For the purposes of Schedule III (Table: Sl No. 12), prescribed allowances, by whatever name called, shall be the following, namely: —
(a) any allowance granted to meet the cost of travel on tour or on transfer;
(b) any sum paid in connection with transfer, packing and transportation of personal effects on such transfer;
(c) 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;
(d) any allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office or employment of profit where no free conveyance is provided by the employer
(e) any allowance granted to meet the expenditure incurred on a helper where such helper is engaged for the performance of the duties of an office or employment of profit;
(f) any allowance granted for encouraging the academic, research and training pursuits in educational and research institutions;
(g) any allowance granted to meet the expenditure incurred on the purchase or maintenance of uniform for wear during the performance of the duties of an office or employment of profit.
(2) For the purposes of Schedule III (Table: Sl No. 13), the prescribed allowances, by whatever name called, and the extent thereof shall be the following, namely :—
(3) An employee, being an assessee, who has exercised an option under section 202(4) of the Act shall be entitled to exemption only in respect of allowances mentioned in sub-rule (1)(a) to sub-rule (1)(d) and at Table: Sl. No. 10 above, to the extent and subject to the conditions, if any, specified therein.
