Different types of allowances

Different types of Allowances

1. Different types of
Different types of
Allowances
Allowances
Presented By;
Presented By;
1)1)Mayur Khatri
Mayur Khatri

2. Mayur Khatri

3. W
hat is A
llow
ance?
W
hat is A
llow
ance?
•A sum of money paid regularly to a A sum of money paid regularly to a
person, typically to meet specified person, typically to meet specified
needs or expensesneeds or expenses
•Allowance are generallyAllowance are generally
Calculated on Basic Calculated on Basic
salarysalary

4. W
hat is B
asic Salary?
W
hat is B
asic Salary?
Basic salary is the fixed salary, invariable, Basic salary is the fixed salary, invariable,
minimum wages, mandatory pay, fixed by the minimum wages, mandatory pay, fixed by the
company to pay the employees. company to pay the employees.
As per the legislative fixation, 30% to 60% of As per the legislative fixation, 30% to 60% of
your salary shall be your basic pay,your salary shall be your basic pay,
i.e., not less than 30% of your gross pay or i.e., not less than 30% of your gross pay or
take home salary and not more than 60%, shall take home salary and not more than 60%, shall
be basic paybe basic pay
attribution

5. T
ypes of A
llow
ances
T
ypes of A
llow
ances
1.Fully exempted allowances.1.Fully exempted allowances.
2. Partly exempted allowances.2. Partly exempted allowances.
3. Fully taxable allowances3. Fully taxable allowances

6. D
earness A
llow
ance
D
earness A
llow
ance
DA is a cost of living adjustment allowance paid to DA is a cost of living adjustment allowance paid to
Government employees and pensioners in India.Government employees and pensioners in India.
As of June 2012, the Dearness Allowance is calculated As of June 2012, the Dearness Allowance is calculated
as a percentage of an Indian citizen's basic salary to as a percentage of an Indian citizen's basic salary to
mitigate the impact of inflation on people belonging to mitigate the impact of inflation on people belonging to
the low income group. the low income group.
The guidelines that govern the DA vary according to The guidelines that govern the DA vary according to
where one lives (for example, whether rural or urban)..where one lives (for example, whether rural or urban)..
((DA Rates for the Central Government Employees)DA Rates for the Central Government Employees)
(July 01, 2013 Dearness Allowance Rate: 90%)(July 01, 2013 Dearness Allowance Rate: 90%)
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7. H
ouse R
ent A
llow
ance
H
ouse R
ent A
llow
ance
HRA is generally paid as component of salary HRA is generally paid as component of salary
package. This allowance is given by an employer package. This allowance is given by an employer
to an employee to meet the cost of renting an to an employee to meet the cost of renting an
accommodation. accommodation. 
Least of following exempt from Tax U/S Least of following exempt from Tax U/S 10(13A)
1. Residential house in Metro city - 50 % of Salary1. Residential house in Metro city - 50 % of Salary
Residential house at other place - 40% of SalaryResidential house at other place - 40% of Salary
2. Actual House rent allowance received.2. Actual House rent allowance received.
3. Rent paid in excess of 10 % of salary.3. Rent paid in excess of 10 % of salary.
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8. C
onveyance A
llow
ance
C
onveyance A
llow
ance
(Transport A
llow
ance)
(Transport A
llow
ance)
The conveyance allowance is a type of allowance The conveyance allowance is a type of allowance
which is paid to the employees of the state As well as which is paid to the employees of the state As well as
central govt. employees in order to meet the expenses central govt. employees in order to meet the expenses
to come to office from the residence of the employeesto come to office from the residence of the employees
It varies on the basis of the city of posting, distance of It varies on the basis of the city of posting, distance of
the employees from the residence to office & type of the employees from the residence to office & type of
conveyance used to travel.conveyance used to travel.
CA is exempted U/S 10(14) read with Rule 2BB upto CA is exempted U/S 10(14) read with Rule 2BB upto
Rs. 800/- p.m. Rs. 800/- p.m.
If person blind or OD then upto Rs. 1600/- P.m.If person blind or OD then upto Rs. 1600/- P.m.
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9. C
ity C
om
pensatory
C
ity C
om
pensatory A
llow
ance
A
llow
ance
It is an allowance paid by employer to compensate It is an allowance paid by employer to compensate
high cost incurred by employee work in big cities like high cost incurred by employee work in big cities like
Delhi, Mumbai, Bangalore, and other metropolitan Delhi, Mumbai, Bangalore, and other metropolitan
cities. cities.
However, it is a fully taxable allowance. i.e. the amount However, it is a fully taxable allowance. i.e. the amount
of this allowance will be taxed with the salary of this allowance will be taxed with the salary
received. received.
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10. Foreign A
llow
ance
Foreign A
llow
ance
This allowance is paid by the Government of India to This allowance is paid by the Government of India to
its citizen employees for being posted outside the its citizen employees for being posted outside the
country and it is not included in total income. It is country and it is not included in total income. It is
completely tax-free U/S 10 (7).completely tax-free U/S 10 (7).
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11. H
elper A
llow
ance
H
elper A
llow
ance
Exempt to the extent incurred on helper where such Exempt to the extent incurred on helper where such
helper is engaged for performance of official duties. helper is engaged for performance of official duties.
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12. Pranati Patel

13. C
hildren Education
C
hildren Education A
llow
ance
A
llow
ance
Children Education Allowance Children Education Allowance Paid for education of Paid for education of
Employee’s children. Exempt up to Rs. 100/- per Employee’s children. Exempt up to Rs. 100/- per
month per child up to maximum of 2 child if Expenses month per child up to maximum of 2 child if Expenses
made in India.made in India.
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14. C
hildren H
ostel
C
hildren H
ostel A
llow
ance
A
llow
ance
Children Hostel Allowance Children Hostel Allowance Paid for education of Paid for education of
employee’s children. Exempt up to Rs. 300/- per employee’s children. Exempt up to Rs. 300/- per
month per child up to maximum of 2 child if expenses month per child up to maximum of 2 child if expenses
made in India.made in India.
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15. T
iffin/Lunch A
llow
ance
T
iffin/Lunch A
llow
ance
Tiffin / Lunch Allowance It is fully taxable. It is given to
employees for lunch as coupons or added as part of
salary.
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16. N
on Practicing
N
on Practicing A
llow
ance
A
llow
ance
Non practicing Allowance This is normally given to Non practicing Allowance This is normally given to
those professionals (like medical doctors, chartered those professionals (like medical doctors, chartered
accountants etc.) who are in government service and accountants etc.) who are in government service and
are banned from doing private practice. It is to are banned from doing private practice. It is to
compensate them for this ban. It is fully taxable.compensate them for this ban. It is fully taxable.
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17. O
vertim
e A
llow
ance
O
vertim
e A
llow
ance
Overtime Allowance When an employee works for Overtime Allowance When an employee works for
extra hours over and above his normal hours of duty, extra hours over and above his normal hours of duty,
he is given overtime allowance as extra wages. It is he is given overtime allowance as extra wages. It is
fully taxable.fully taxable.
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18. R
etaining A
llow
ance
R
etaining A
llow
ance
It means an allowance payable for the time being to It means an allowance payable for the time being to
an employee of any factory or other establishment an employee of any factory or other establishment
during any period in which the establishment is not during any period in which the establishment is not
working, for retaining his services working, for retaining his services
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19. M
edical A
llow
ance
M
edical A
llow
ance
Medical Allowance is a fixed monthly allowance which
forms a part of Salary. It is paid as a fixed amount which is
determined as per the company’s policy where an
individual is employed  and it has no relevance with the
medical expenses incurred.
Medical Allowance is added in taxable income under the
head “Salaries” and it is fully taxable.
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20. Entertainm
ent
Entertainm
ent A
llow
ance
A
llow
ance
Money which given by employer is allowed by his or her Money which given by employer is allowed by his or her
company to spend on meals with visitorscompany to spend on meals with visitors
In the case of a Government employee (i.e., Central In the case of a Government employee (i.e., Central
Government or a State Government employee), the least of Government or a State Government employee), the least of
the following is deductible:the following is deductible:
Rs. 5,000/-Rs. 5,000/-
20% of basic salary ; or20% of basic salary ; or
Amount of entertainment allowance granted during the Amount of entertainment allowance granted during the
previous year.previous year.
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21. Uniform
A
llow
ance
Uniform
A
llow
ance
Any allowance, which is granted to meet the Any allowance, which is granted to meet the
expenditure incurred on purchase or maintenance of expenditure incurred on purchase or maintenance of
uniforms to wear during the performance of the duties uniforms to wear during the performance of the duties
of an office. of an office.
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