CA Aashish Ramchand
Allowances given by employer to employees forms Part of Salary. Some of these Salary allowances are exempt from taxes subject to expense incurred against such Allowances but some allowances are exempt irrespective of expenditure incurred. 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. | i. It is exempt up to Rs. 1600 per month (withdrawn wef A.y 2019-20 and a standard deduction of Rs 40,000 is allowed in lieu of this allowance and medical reimbursement)
ii. Rs. 3200 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)
Entertainment allowance & its deduction from salary
(Republished With Amendments)
IS ENTERTAINMENT ALLOWANCE TAXFREE FOR SEMI GOVERNMENT EMPLOYEE. AND IF IT IS TAXFREE THEN WHICH TYPE OF EMPLOYMENT SHOULD BE CHOSEN IN THE NATURE OF EMPLOYMENT SECTION.
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.