Allowances
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This document discusses various types of allowances provided by employers to employees. It outlines allowances that are fully taxable, fully exempted, and exempted up to a specified limit. Fully taxable allowances include dearness allowance and family allowance. Fully exempted allowances include those from the United Nations. Allowances exempted up to a limit include house rent allowance, transport allowance, children education allowance, and hills allowance. The document also discusses categories for allowances and calculating tax exemptions for house rent allowance and entertainment allowance.
Allowances
- 1. Allowances Dr. P. Ravichandran M.Com., M.B.A., M.A (Astrology)., M.Phil., Ph.D., D.C.P., D.L.L & A.L., P.G.D.C.A., P.G.D.P.M & I.R., S.B.K. College, Aruppukottai ā 626101. ļ 9443424090 & 9080030090 ļ e-mail id.- [email protected]
- 2. Allowances ļFixed monetary payments for a specific purpose is known as allowance. ļAn allowance is a fixed monetary amount paid by the employer to employee for expenses related to office work. ļAllowance are generally included in the salary and taxed unless there are exemption available.
- 3. Fully Taxable Allowances ļ Dearness allowance (DA) (or) Dearness Pay (DP); ļ City Compensatory allowance (CCA); ļ Medical allowance; ļ Tiffin / Lunch allowance; ļ Servant allowance; ļ Warden allowance and Proctor allowance; ļ Non-practizing allowance; ļ Family allowance; ļ Deputation allowance; ļ Over-time allowance; ļ Hill allowance ā places located at less than 1000 meter height from sea level.
- 4. Fully exempted allowances ļForeign allowances. ļAllowances to High Court and Supreme Court Judges. ļAllowances from United Nations Organisation (UNO).
- 5. Allowances exempted up to a specified limit 1. House Rent Allowance; 2. Entertainment allowance; 3. Uniform allowance; 4. Helper allowance; 5. Academic allowance; 6. Transport allowance; 7. Hills allowance; 8. Tribal area allowance; 9. Children education allowance; 10. Children hostel allowance; 11. Underground allowance; 12. Free lunch allowance exempt upto ā¹ 50 per day. Note: Allowances like Travelling allowance, Conveyance allowance, Daily allowance, Helper allowance, Uniform allowance, Research allowances are exempted u/s10(14) subject to actual expenses incurred.
- 6. ALLOWANCES Category ā 1 Received (or) Spent (Whichever is less) Category ā 2 Received (or) Limit (Whichever is less) Category ā 3 House Rent Allowance (HRA)
- 7. Category-1 : Received (or) Spent (whichever is less) ļConveyance allowances; ļAcademic allowances; ļTravelling / transfer allowances; ļHelper allowances; ļUniform allowances; ļDaily allowances; ļ Received ā¹ 10,000 / Spent ā¹ 8,500 / ļTaxable ā¹ 8,500.
- 8. Category 2 : Received (or) Limit (which ever is less) Children Education allowances : Exempted up to ā¹ 100/- per month per child (up to maximum 2 children). Hostel allowances : Exempted up to ā¹ 300/- per month per child (up to maximum 2 children) Transport allowances : Exempted up to ā¹ 1,600/- per month, For handicapped employees - ā¹ 3,200/- p.m
- 9. Allowances to transport employees & Personal (Expenditure) allowance (or) Any Running Flight allowance The amount of exemption shall be :- ā¹ 10,000/- p.m (or) 70% of such allowances (whichever is less) Hilly area / Border areas / Remote areas allowances: ā¹ 300 ā ā¹ 7,000 /- per month Contdā¦
- 10. Tribal area allowance : ā¹ 200/- per month Under ground allowances : These allowances are granted to employees working in uncongenial, unnatural climate in under-ground coal mines. Exempt up to ā¹ 800 per month. Contdā¦
- 11. CATEGORY - 3 : HRA. HOUSE RENT ALLOWANCE ļ Least of the following shall be exempted : ļ Actual amount (HRA) received; ļ Rent paid less 10 % of the Salary; ļ 50% (or) 40% of the Salary. Note: 50% of the Salary ā if the house is located in Delhi / Mumbai / Kolkata / Chennai) 40% of the Salary ā if the house is located elsewhere ) ļSalary means ā Basic salary + DA (if enters) + fixed percentage of commission on turnover
- 12. ENTERTAINMENT ALLOWANCE ļ Entertainment allowances is first included in income under the head Salaries and deduction is given to Govt. Employees only. ļ Least of the following shall be exempt : ļ Actual amount received; ļ 20% of Basic Salary; ļ ā¹ 5,000/-.
- 13. PERQUISITES (Personal advantages) ļPerquisites are benefits attached in addition to normal salary to which an employee has right by way of his employment. ļPerquisites may be provided in cash or in kind. ļPerquisites are included in salary only if they are received by an employee from his employer ( may be former, present or prospective.) ļPerquisites received from a person other than employer, are taxable under the head āPGBPā or āIFOSā.