Allowance is defined as
a fixed quantity of money or other substance given regularly in addition to salary
for meeting specific requirements of the employees. As a general rule, all
allowances are to be included in the total income unless specifically exempted.
Exemption in respect of
following allowances is allowable to the exent mentioned against each :-
House Rent Allowance:-
Provided that expenditure on rent is actually incurred, exemption available
shall be the least of
the following :
(i)
HRA received.
(ii)
Rent paid less 10% of salary.
(iii)
40% of Salary (50% in case of Mumbai,
Chennai, Kolkata, Delhi) Salary here means Basic +
Dearness Allowance, if
dearness allowance is provided by the terms of employment.
Leave Travel Allowance:
The amount actually incurred on performance of travel on leave to any place in
India by the shortest route to that place is exempt. This is subject to a
maximum of the air economy fare or AC 1st Class
fare (if journey is performed by mode other than air) by such route, provided
that the exemption shall be available only in respect of two journeys performed
in a block of 4 calendar years.
Certain allowances
given by the employer to the employee are exempt u/s 10(14). All these exempt allowance
are detailed in Rule 2BB of Incometax Rules and
are briefly given below:
For the purpose of
Section 10(14)(i), following allowances are exempt, subject to actual expenses
incurred:
(i)
Allowance granted to meet cost of travel on
tour or on transfer.
(ii)
Allowance granted on tour or journey in
connection with transfer to meet the daily charges incurred by the employee.
(iii)
Allowance granted to meet conveyance expenses
incurred in performance of duty, provided no free conveyance is provided.
(iv)
Allowance granted to meet expenses incurred
on a helper engaged for performance of official duty.
(v)
Academic, research or training allowance
granted in educational or research institutions.
Allowance granted to meet expenditure on purchase/ maintenance of
uniform for performance of official duty.
