SALARY : TAXABLE AND NON TAXABLE ALLOWANCES

SALARY : TAXABLE AND NON TAXABLE ALLOWANCES

I am trying to cover tax issue regarding allownace generally received to salaried persons and treatment Under Income Tax Act & Rules.

Allowance: means Fixed amount of money or other substance given monthly in addition to salary to meet the particular type of expenditure.
Treatment:Allowances are part of salary and taxable in hands of the assessee if no specific exemption is given under the Income Tax

Act/Rules

I am trying to cover most of the allowances but this is not a exhaustive list.
  1. HRA(House Rent Allowance ) house rent allowance is exempted u/s 10(13A) of the income tax act.Least of the following is exempted from Hra Received(details is available here)
    • HRA received
    • House rent paid minus 10 % of salary(salary means basic plus dp plus da if term of employment so provides)
    • 50% of salary(same meaning as above)in case of rented house situated in Bombay,Madras,Delhi or calcutta
    • 40 % of salary ,if rented house is situated in any other places
  2. City compensatory allowance :Fully taxable.
  3. Foreign Allowance :Exempt from tax if paid outside India By the government to the Indian citizen for rendering services outside India.
  4. Fixed medical allownace:Taxable.
  5. Project Allowance :taxable.
  6. Allowances to Supreme court/High court Judges :Not taxable.
  7. Servant/helper Allowance :taxable ,if helper used for official purpose then exempted..
  8. Transport Allowance: known also as LODA ,means allowance to meet expenses incurred for office to home and home to office is exempted up to 800 per month maximum.
  9. Tiffin Allowance :Taxable .
  10. Allowance to meet the cost of travel on tour or on transfer(including amount paid for packing and transportation of personal effects on such transfer):exempted to the extent allowances used for said purpose.
  11. Allowance (know as DA in TA bill) paid for purpose explained in point 11 above ,to meet the ordinary daily charges on account of absence from his normal place of duty):exempted to the extent allowance used for the said purpose
  12. Conveyance allowance:To meet the expenditure on conveyance in performance of duties of an official nature:exempted to extent allowance used for said purpose
  13. Uniform allowance : exempted to the extent used for the said purpose
  14. Children Education allowance :Rs 100 per month per child up to maximum of two child is exempted if expenses made in India
  15. Children hostel allowance:Rs 300 per month per child up to maximum of two child is exempted if expenses made in India
  16. Allowance granted to employee working in transport system where no daily allowance has not been allowed to meet daily expenses ,done to meet his personal expenses during duty performance from one place to other place :70 % of such allowable exempted maximum up to 6000 per month.
  17. Allowance granted for encouraging the academic ,research and other professional pursuits:exempted to the extent used for said purpose
  18. many hilly area,remote area,field allowances are exempted on various rate
  19. Any other allowance :generally Taxable.

Source : Simpletaxindia.blogspot.com

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