Allowances

Various types of 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 – 626101.  9443424090 & 9080030090  e-mail id.- [email protected]

2. Allowances Fixed monetary payments for a specific purpose is known as allowance . An allowance is a fixed monetary amount paid by the employer to employee for expenses related to office work. Allowance are generally included in the salary and taxed unless there are exemption available.

3. Fully Taxable Allowances Dearness allowance (DA) (or) Dearness Pay (DP ); City Compensatory allowance (CCA ); Medical allowance; Tiffin / Lunch allowance; Servant allowance; Warden allowance and Proctor allowance; Non- practizing allowance; Family allowance; Deputation allowance; Over-time allowance; Hill allowance – places located at less than 1000 meter height from sea level.

4. Fully exempted allowances Foreign allowances. Allowances to High Court and Supreme Court Judges . Allowances 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 ₹ 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 – 1 Received (or) Spent (Whichever is less) Category – 2 Received (or) Limit (Whichever is less) Category – 3 House Rent Allowance (HRA)

7. Category-1 : Received (or) Spent ( whichever is less ) Conveyance allowances; A cademic allowances; T ravelling / transfer allowances; H elper allowances; U niform allowances; D aily allowances;  Received ₹ 10,000 / Spent ₹ 8,500 / Taxable ₹ 8,500.

8. Category 2 : Received (or) Limit ( which ever is less ) Children Education allowances : Exempted up to ₹ 100/- per month per child (up to maximum 2 children). Hostel allowances : Exempted up to ₹ 300/- per month per child (up to maximum 2 children) T ransport allowances : Exempted up to ₹ 1,600/- per month, For handicapped employees - ₹ 3,200/- p.m

9. Allowances to transport employees & Personal (Expenditure) allowance (or) Any Running Flight allowance The amount of exemption shall be :- ₹ 10,000/- p.m (or) 70% of such allowances (whichever is less) H illy area / Border areas / Remote areas allowances: ₹ 300 – ₹ 7,000 /- per month C ontd …

10. Tribal area allowance : ₹ 200 /- per month U nder ground allowances : These allowances are granted to employees working in uncongenial, unnatural climate in under-ground coal mines. Exempt up to ₹ 800 per month. C ontd …

11. CATEGORY - 3 : HRA. HOUSE RENT ALLOWANCE  Least of the following shall be exempted :  Actual amount (HRA) received;  Rent paid less 10 % of the Salary;  50% (or) 40% of the Salary. Note : 50 % of the Salary – if the house is located in Delhi / Mumbai / Kolkata / Chennai) 40% of the Salary – if the house is located elsewhere ) Salary means – Basic salary DA (if enters) fixed percentage of commission on turnover  

12. ENTERTAINMENT ALLOWANCE  Entertainment allowances is first included in income under the head Salaries and deduction is given to Govt. Employees only .  Least of the following shall be exempt :  Actual amount received;  20% of Basic Salary;  ₹ 5,000/-.

13. PERQUISITES (Personal advantages) Perquisites are benefits attached in addition to normal salary to which an employee has right by way of his employment. Perquisites may be provided in cash or in kind. Perquisites are included in salary only if they are received by an employee from his employer ( may be former, present or prospective.) Perquisites received from a person other than employer, are taxable under the head “PGBP” or “IFOS”.