Income Tax Exemption on prescribed allowances/ benefits | Section 10(14)

Section 10(14) of the Income Tax Act provides exemptions towards allowances and benefits granted to the employees to meet certain expenses. Rule 2BB of the Income Tax Rules prescribes the list of allowance which exempted under section 10(14)(i) of the Income Tax Act and section 10(14)(ii of the Income Tax Act.

The said exemption covered under section 10(14) read with rule 2BB is exhaustively explained under the current article.

Understanding provisions of section 10(14)(i) read with rule 2BB(1)-

Provisions of section 10(14)(i)provide exemption towards prescribed special allowance or benefits, granted to the employees, to meet expenses (wholly, exclusively, and necessarily) towards the performance of the official duty. The exemption is available only and only if the expenses are actually incurred by the employees.

Rule 2BB(1) lists down the prescribed allowances as-

1. Allowance granted to meet the cost of travel on tour or transfer.

2. Daily allowance granted to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.

3. Conveyance allowance granted to meet the expenses incurred on conveyance in the performance of duties of an office. However, free conveyance should not be provided by the employer.

4. Helper allowance granted to meet the expenses incurred on helper who is engaged for the performance of duties of an office.

5. Research allowance granted for encouraging the research, academic and training pursuits ineducational and research institutions.

6. Uniform allowance granted to meet the expenses incurred on purchase / maintenance of uniform for wear during the performance of duties of an office.

Understanding provisions of section 10(14)(ii) read with rule 2BB(2)-

Provisions of section 10(14)(ii)provide exemption towards the prescribed allowance granted to an employee to meet his personal expenses at either of the below place-

• at the place where the duties of his office are ordinarily performed by him; or
• at the place where he ordinarily resides.

The amount of exemption is lower of the following-

• Amount received as allowance; or
• Limit, as prescribed under rule 2BB(2).

Rule 2BB(2) lists down the prescribed allowances as-

1. Special compensatory allowance / climate allowance for working in a hilly area or high altitude or-

• • INR 800 per month for the prescribed areas.
  • INR 7000 per month for the Siachen area.
  • INR 300 per month for all the places located at the height of 1,000 meters or more above the sea levels.

2. Border area allowance / difficult or disturbed area allowance / remote locality allowance-

• • INR 1,300 per month for the prescribed areas.
  • INR 1,100 per month for installations in the Continental Shelf and Exclusive Economic Zone of India.
  • INR 1,050 per month for the prescribed areas.
  • INR 750 per month for the prescribed areas.
  • INR 300 per month for the jog falls in Shimoga (Karnataka).
  • INR 200 per month for the State of Himachal Pradesh, Assam, and Meghalaya.

3. Tribal or schedule or agency area allowance-

INR 200 per month for the states of Madhya Pradesh, Uttar Pradesh, Assam, Tamil Nadu, Karnataka, Tripura, West Bengal, Orissa, and Bihar.

4. Allowance to an employee working in a transport system to meet personal expenses while on duty- 70% of such allowance (maximum up to INR 10,000 per month).

5. Children Education allowance- INR 100 per month per child (up to a maximum of 2 children).

6. Allowance for employee’s child hostel expenses- INR 300 per month per child (maximum up to two children).

7. Compensatory field area allowance-

• INR 2600 per month for the prescribed area of Arunachal Pradesh, Sikkim, Himachal Pradesh, Uttar Pradesh, and Jammu and Kashmir and throughout Manipur and Nagaland.

8. Modified Field Area Allowance-

• INR 1000 per month for the prescribed area of Punjab, Rajasthan, Haryana, Himachal Pradesh, Arunachal Pradesh, Assam, Sikkim, West Bengal, Uttar Pradesh, Jammu and Kashmir, and throughout Mizoram and Tripura.

9. Counter-insurgency allowance to members of armed forces- INR 3,900 per month.

10. Transport allowance granted to a disabled employee to meet his travel expense from his place of residence to place of duty- INR 3,200 per month.

11. Underground allowance to employees working in underground mines- INR 800 per month.

12. High altitude / uncongenial climate allowance granted to armed force members operating in high altitude areas-

• INR 1,060 per month for an altitude of 9000 – 15000 feet.
• INR 1,600 per month for an altitude above 15000 feet.

13. Highly active field area allowance granted to armed force members- INR 4,200 per month.

14. Island allowance granted to armed force members-

• INR 3,250 per month for areas of Andaman & Nicobar and Lakshadweep.

Table – Articles on Section 10 Exemptions