Special Allowances for Salaried Employees under Section 10

The allowances under section 10 for employees are predetermined, fixed and awarded in addition to the salary to meet specific requirements. Moreover, this fixed amount is granted irrespective of the employee’s actual spending. Thus, most of these allowances under Section 10 are also taken into account during taxation.

Many salaried employees usually get a fixed amount of money as Allowance under Section 10 of Income Tax Act. So, what exactly is an Allowance under Section 10? Let us take a step back and understand what an allowance is.

What is an allowance?

Generally, allowance is defined as a fixed amount of cash or benefits given regularly to the salaried employee, in addition to the salary, to fulfil the particular requirements related to the services provided by the employee or as compensation for doing service in unusual conditions.

Salaried employees get a wide variety of Allowances under Section 10 of the Income Tax Act, 1961. These include Leave Travel Allowance (LTA), House Rent Allowance (HRA), Uniform Allowance, Academic/Research Allowance and more.

The allowances under section 10 for employees are predetermined, fixed and awarded in addition to the salary to meet specific requirements. Moreover, this fixed amount is granted irrespective of the employee’s actual spending. Thus, most of these allowances under Section 10 are also taken into account during taxation. However, some portion of this allowance is eligible for exemption under section 10 of the Income Tax Act.

Travelling Allowance, Medical Allowance, House Rent Allowance, Uniform Allowance, and Leave Travel Allowance are allowances under section 10 of the Income Tax Act. However, there are other specific allowances eligible for section 10 exemption and come under Section 10 (14) of the Income Tax Act, 1961. Let us explore this section in detail.

Section 10 (14)

Section 10(14) of the Income Tax Act, 1961 is also referred to as The Special Allowance Act. Under this act, section 10 exemption is made on the allowance, based on the utilisation of the amount for the particular purpose. The exemption amount is calculated as per the factors mentioned below:

  • The allowance amount
  • Exact amount utilised for the specific purpose of the allowance

Section 10(14) (i)

Under this section, the actual amount that becomes eligible for exemption from income tax is the amount incurred on the specific purpose or the amount provided as an allowance, whichever is lower.

Allowances under Section 10(14) (i) include:

Daily Allowance: This allowance is granted to meet an employee’s daily expenses when they are on tour performing their duty or during the period of transfer of duty to another location. In simple terms, this allowance is provided when an employee on duty is at a non-home location.

Note: Exemption is granted to the extent of expenditure incurred.

Travel Allowance: The allowance for travels covers the travel expenses incurred while performing duty on tour or during the transfer period. Moreover, the travel expenses incurred on packaging and transportation of personal things, during transfer, are also covered in this allowance.

Note: Exemption is granted to the extent of expenditure incurred.

Conveyance Allowance: Employees are granted conveyance allowance to fulfil their expenses incurred on travelling while performing their duty.

However, employers don’t compensate on travel from residence to the office because it does not fall under an act of duty. This compensation is included under a separate category called the Transport Allowance, which is not exempted from taxation.

Note: Exemption is granted to the extent of expenditure incurred.

Academic/Research Allowance: The allowance awarded to employees to encourage research and academic-related education, professional duties and training, is referred to as research or academic allowance.

Note: Exemption is granted to the extent of expenditure incurred.

Helper Allowance: When the employer allows an eligible employee to keep a helper to assist the employee in performing the duty, a helper allowance is provided.

Note: Exemption is granted to the extent of expenditure incurred.

Uniform Allowance: This allowance is provided to the employee for purchasing and maintaining the uniform, which is compulsory to wear while performing the duty. However, this allowance is provided only when the employer prescribes the use of a particular uniform on duty.

Note: Exemption is granted to the extent of expenditure incurred.

Generally, the employee doesn’t have to furnish any details about the spendings done under these categories, unless they are unreasonable in comparison to the duties performed or are disproportionate to the salary of the employee.

Most often, it isn’t mandatory to submit the documents as proof of the expenses — a declaration is enough for the same.

Section 10(14) (ii)

Allowance under Section 10(14) (ii) is provided to an employee for performing their duties under specific or unusual conditions. The actual amount eligible for an exemption is the mentioned allowance limit or the amount provided as an allowance, whichever is lower.

The different kinds of allowances that fall under this class and their respective amount threshold is as mentioned as follows:

Compensatory Allowance: This allowance is provided for performing the duty in hilly areas or higher altitude regions. This is also referred to as Climate Allowance:

  • Mountainous regions of Jammu & Kashmir, Himachal Pradesh, North East and Uttar Pradesh — 800 INR per month
  • Common areas above 1000 metres or above — 300 INR per month
  • Siachen region of Jammu & Kashmir — 7000 INR per month

Agency, Tribal, Scheduled areas Allowance: This allowance is provided to an employee for performing their duties in the tribal regions in the states of Tripura, Uttar Pradesh, Bihar, Tamil Nadu, Odisha, Assam, Madhya Pradesh, West Bengal or Karnataka — 200 INR.

Allowances for doing duty in disturbed/difficult areas, border areas or any remote area:
Allowances range from 200 INR to 1300 INR per month. This allowance is exempt from taxes under Rule 2BB.

Allowances for the education of children: This allowance is given to help support the education of the children of the employee — 100 INR per month for every child (two children maximum).

Allowance for personal spendings while performing their duties in the transport system:
Allowance of up to 70% or up to 10,000 INR per month.

Field Allowance: This allowance is given for work done in the regions of Nagaland, Manipur, Jammu & Kashmir, Sikkim, Andhra Pradesh, Uttar Pradesh and Himachal Pradesh — 2600 INR per month.

Allowance for hostel expenses of the employee’s children: The employee gets an allowance of 300 INR per month for every child and maximum for two children.

Transport Allowance for an on-duty physically challenged employee: 1600 INR per month.

Transport Allowance for employees to commute between residence and work: 1600 INR per month.

Compensatory allowance for performing duties in a modified field zone: Particular regions of North East, West Bengal, Jammu & Kashmir, Uttar Pradesh, Himachal Pradesh and Rajasthan – 1000 INR per month.

Island duty allowance: This allowance is provided to defence forces who perform their duties in Lakshadweep and Andaman & Nicobar — 3250 INR per month.

Allowance provided to defence forces for counter-insurgency cases: 3900 INR per month.

Allowance for performing duty in an underground mine: 800 INR per month.

Special compensatory allowance for performing duties in a highly active field zone: 4200 INR per month.

Allowance for defence forces for performing duties in high altitude areas:
9000 feet to 15,000 feet – 1060 INR per month
Above 15,000 feet – 1600 INR per month

Allowance exemption under Section 10 for special individuals

Certain special individuals receive an exemption of their Allowance under Section 10. They are:

  • Allowance provided to the judges of the high court
  • Allowance provided to a UNO employee
  • Allowances provided to employees in the service of the Indian government who are working abroad and are Indian citizens
  • Sumptuary allowance provided to the judge of High court and Supreme court

Many people ask “what is exemption U S 10 in salary slip? This is the allowance under sec 10 of the Income Tax Act. In short, it is the amount eligible for section 10 exemption.

Salaried employees can take advantage of these exempt allowances under Section 10 as a tax benefit. This will save them money on their respective expenses. You can connect with our experts to know more about filing taxes, tax-saving schemes and other exemptions that apply to you.

1 Star2 Stars3 Stars4 Stars5 Stars (1 votes, average: 5.00 out of 5)

One of the prime contributors for this blog, Expertise in Staffing and Recruitment, Content Strategist by Profession. A Music Lover & Traveller by Choice.

Post a Comment

Your email address will not be published. Required fields are marked *

Related Posts

Section 80GG — Deductions on Rent Paid

Section 80GG — Deductions on Rent Paid

Subin Nov 26, 2020 9:25 AM

In general, the House Rent Allowance or HRA is a component of the salary of an individual, and the individual can claim tax deductions on…

E-filing Income Tax in India

E-filing Income Tax in India

Subin Nov 18, 2020 8:46 AM

Many have heard of the terms — income tax e-filing and income tax returns, but very few know what they are and what documents are…

A Detailed Guide to Calculate HRA (with examples)

A Detailed Guide to Calculate HRA (with examples)

Shalini L Nov 11, 2020 11:52 AM

HRA or House Rent Allowance is a part of the remuneration package of salaried employees. For an individual living in rental accommodation, HRA can help…

Old or New: A Comparison of The Two Tax Regimes for The Average Taxpayer

Old or New: A Comparison of The Two Tax Regimes for The Average Taxpayer

Rishabh Ranjan Nov 01, 2020 10:34 AM

Tax is a subject that befuddles most. Taxpayers have one, and only one motive — save tax. In the past, the Government of India tweaks…

A Start-up’s Guide on The Basics of Taxation

A Start-up’s Guide on The Basics of Taxation

Shalini L Nov 01, 2020 9:03 AM

Running a start-up is filled with excitement with new things to learn and new challenges to face. But after the initial hoopla has fizzled out…

Subscribe For Newsletter

Subscribe to get the latest news and happenings around recruitment space

Please hold while we process the request.