The system of the special allowance varies from company to company and is given besides the basic salary. This allowance is generally a bonus amount or benefit granted to the employees in some specific expenditure.
Some employees are even given a special allowance in salary to appreciate the superior work performance of the employee. Specific allowance categories are entirely or partially exempted under Section 10(14) of the Income Tax Act of 1961. If you are interested in knowing more about these services, click here and read more about epfo e sewa.
How is Special Allowance Taxed
Some special allowance categories are entirely exempted from taxes like those given to the High Court and Supreme Court judges. House rent allowances are partially taxed under Section 10(13A). Assistance such as compensatory city allowances is entirely taxable.
Special Allowance Categories and corresponding Exemptions
The categories of providing special subsidies are listed below:
● Transport Allowance- given to the employees for their transportation from work to home and vice versa. It can be exempted up to Rs 1,600 per month. Extension up to Rs 3,200 in the case of disabled employees is applicable.
● Tribal area allowance- given if an employee is posted in a tribal area. One can claim an exemption up to Rs 200 per month.
● Special compensatory Allowance (Hilly area)- depends upon the expense conditions of the room and is exempted accordingly from Rs 300- Rs 800 per month.
● Border area- also depends on the particular area and is exempted accordingly from Rs 200- Rs 1300 per month.
● Outstation allowance- is given to the employees of roadways, railways, and airways.
● Children Education Allowance- is granted to contribute to the education expenses of the employee’s child. It can be exempted up to Rs 100 per child and applicable up to two children.
● Hostel Allowance- can be exempted up to Rs 300 per month for every child and is suitable only for two children.
● Underground/ Mining- the workers get an exemption of Rs 800 per month from their special allowance.
● Island duty allowance- mainly for the armed forces with an exemption of Rs 3,250 per month.
● Uniform Allowance is offered based on the expenses incurred to purchase and maintain the uniform at work.
● Academic/ Research Allowance- it is given to support and encourage people for academic and research-related fields.
● Travelling Allowance- is issued when an employee is sent on an official tour or transferred to another city.
● Conveyance Allowance- is bearable by the company when an employee has to visit different placesto performf the duties assigned.
● Daily Allowance- is provided to meet the customary charges required when an employee is away on tour.
● Helper Allowance- if the employee has to hire a helper/assistant for specific official duties, then the company provides this helper allowance.