50.4.1 WhenExemption Depends upon Actual Expenditure by The employee-
The folling allowances are exempt under section10(14) to the extent the amount
is
utilized for the specifiedpurpose for which the allowance is received.In words,
in the cases given below the amount of Exemptions under section10(14)is-
a.the amount of allowance ; or
b.the amount utilized for specific purpose for which allowance is given,which is lower.
exemption is available on the aforesaid basis in the case of following
allowances-
| Name of allowance |
Nature of allowance |
| Traveling allowance/trans-fer allowance |
Any allowance(by whatever name called)granted to meet the cost of travel on tour or on
transfer
(including any sum paid in connection with transfer,packing and transportation of
personal
effects on such transfer). |
| Conveyance allowance |
conveyance allowance granted to meet the expenditure on conveyance in performance of
duties
of
any office (it may be
noted that an expenditure for converging the journey between office and,
consequently,such
expenditure is not from tax). |
| Daily allowance |
Any allowance whether granted on tour or for the period of journey in connection with
transfer,to meet the ordinary daily charges
incurred by an employee on account of absence from his normal place of duty. |
| Helper allowance |
Any allowance (by whatever name called)to meet the expenditure on helper where such
helper
is
engaged for the performance
of official duties |
| Research allowances |
Any allowance(by whatever name called)granted for encouraging the academic
research and other professional pursuits. |
| uniform allowance |
Any allowance(by whatever name called)to meet the expenditure on the purchase or
maintenance of
uniform
for wear during the performance of duties of any an office. |
14(ii)
50.4.2When Exemptions Does Not Depend Upon Expenditure-
In the cases given below,the amount of exemption does not depend upon expenditure incurred by the
employee.Regardless of the amount
of expenditure,the allowance given below are exempt to exeter of-
a.the amount of allowance;or
the amount specified in rule2BB,which is lower
On the above basis,exemption is available in the case of the following allowance.It may be noted
that
in
these cases,the amount of Actual
expenditure is not taken into consideration-
| Name of allowance |
Nature of allowance |
Exemption as specified in rule 2BB |
| special compensatory(Hill Areas)Allowance |
It includes any special compensatory allowance in the nature of special
compensatory(hilly
areas)allowance or
high attitude allowance or uncongenial climate allowance or snow bound area allowance or
avalanche allowance. |
Amount exempt from tax varies from Rs. 300 per month to rs.7,000 per month |
| Border area allowance |
It includes any special compensatory allowance in the nature of border area allowanceor
remote
locality allowance or difficult
area allowance or disturbed area allowance. |
The amount of exemption varies from rs. 200 per month to 1,300 per month |
| Tribal areas/scheduled areas allowance |
Tribal areas allowance is given in (a)Madhya pradesh;(b)Tamil Nadu; (c) utter pradesh;
(d)
karnataka;(e) Tripura;(f) Assam
(g) west Bengal; (h) Bihar; (i) Orrisa. |
Rs. 200 per month |
| Allowance For Transport employees |
It is an allowance granted to an employee working in any transport system to meet his
personal
Expenditure during his
duty preformed in the course of running of such transport from one place to another
place
provided that such employee is not
in receipt of daily allowance. |
The amount of exemption is -
a.70 per cent of such allowance; or
b.Rs. 100000 per month whichever is lower. |
| Children education Allowance |
The allowance is given for children's education. |
The Amount expect is limited to Rs. 100 per month per child up to a maximum of two
children.
|
| Hostel expenditure allowance |
This allowance is granted to an employee to meet hostel expenditure on his chaild. |
It is expect from tax to the extent of rs. 300 per month per child up to a maximum of
two
children |
| compensatory field area allowance |
If this exemption is taken, the same employee cannot claim any exemption in respect of
border
area allowance mentioned above. |
Exemption is limited to rs. 2,600 per month in some cases. |
| compensatory modified area allowance |
It this exemption is taken, the same employee cannot claim any exemption in resept of
border
area allowance mentioned above. |
Exemption is limited to Rs. 1,000 per month in cases. |
| Counter insurgency allowance |
It includes any special allowance in the nature of counter-insurgency allowance granted
to
the
members of armed
forces operating in areas away from their permanent locations.If this exemption is
taken,the
same employee cannot
claim any exemption in resept of border area allowance mentioned above. |
Exemption is limited to Rs.3,900 per month in some cases. |
| Transport allowance |
Transport allowance granted to an employee to meet his expenditure for the purpose of
commuting
between the place of
his residence and the place of his duty-In the case of an employee who is blind or
deaf
and
dumb orthopedically handicapped
In the case of any other employee
|
Rs.3,200 per month nill(with effect from the assessment year 2019-20) |
| Underground allowance |
Underground allowance is granted to an employee Who is working in uncongenial, unnatural
climate in underground mines. |
Exemption is limited to Rs.800 per month. |
| High altitude allowance |
It is granted to the members of armed forces operating in high altitude areas. |
It is exempt from tax up to Rs.1,060 per month(for altitude of 9,000 to 15,000 feet)or
rs
1600
per month for altitudeabove 15,000feet |
| Highly active filed area allowance |
The special allowance is granted to the members of armed forces the nature of special
compensatory highly active filed area allowance. |
It is exempt from tax up to Rs 4,200 per month. |
| Island duty allowance |
This special allowance is granted to the members of armed forces in the nature of
Island(duty)allowance
in Andaman and Nicobar Lakshaweep ground of Island. |
It is exempt up to Rs.3,250 per month. |
HRA Allowance
50.2 House rent allowances [sec. 10(13A) and rule 2A]-Exemption in respect of house rent
allowance is regulated by rule 2A.It is based upon the following-
| 1 |
An amount equal to 50 pre cent of salary, where residential house is situred at Bombay,
calcutta,
Delhi
or Madras and an amount equal to per cent of salary where residential house is situated
at
any
other place. |
| 2 |
House rent allowance received by the employee in respect of the period during which
rental
accommodation
is occupied by the employee during the previous year. |
| 3 |
The excess of rent paid over 10 per cent of salary. |
.Amount exempt from tax- The least of the above three is exempt from tax.
50.2.1 MEANING OF SALARY-"Salary" for the aforesaid purpose means basic salary and
includes
dearness allowance if terms of
employment so provide. It also includes commission based on fixed percentage of turnover achived
by
an
employee as per terms of Contact
of employment- Gestetner Duplicators(p).Ltd. v. CIT[1979] 1/117 ITR 1 (sc).But it does not
include
any
other allowance and perquisites.
.Salary shall be determined on "due" basis-Basic salary,dearness allowance and commission are
determined
on "due" basis in respects the
period during which rental accommodation is occupied by the employee in previous
year[Explanation(ii)to
rule 2A]. It, therefore,follows
that salary of a period other than the previous year are not considered, even though such amount
is
received during the previous year and is taxable
on"receipt"basis Likewise, salary of the period during which rental accommodation is not
occupaid in
the
previous year are left out of the
aforesaid computation.
50.2.2 EXEMPTION WHEN RENT PAID DOES NOT EXCEED 10 PER CENT OF SALARY-Exemption is denied
where an
employee lives in his
own house, or in a house for which he does not pay any rent or pays rent which does not exceed
10
per
cent of salary.
50.2.3 NO EXEMPTION WHEN EMPLOYEE RESIDES IN HIS OWN HOUSE-Exemption under section
10(13A)is
not
available if an employee resides
in his own house or if the employee does not incur any expenditure on payment of rent.
Conversely if
the
house in which the employee resides
not owned by him and he pays rent for it,he can claim exemption within the parameters of
selection
10(13A). Exemption is available even if
house is owned by a close relative (may be wife or husband or father or mother)and for which
rent is
rent is regularly paid(there is no
legal requirement but in such cases rent should be paid through bank transfer entry)- Bajrang
prasad
Ramdhraniv.CIT[2013]60 sot 66(Ahd).
50.2.4 MODE OF COMPUTATION OF EXEMPTION -The amount of exemption in respect of house rent
allowance received by an employee depends upon the following:
a."salary"of the employee;
b.house rent allowance;
c.rent paid; and
d.the place where house is taken on rent.
when these four are the same throughout the previous year, the exemption should be calculated on
"annual"basis when however, there is a change
in respect of any of the afore said factors, then the exemption shall be worked out on "monthly"
basis.
This Form will helpful for HRA Calculation. Below are list of basics information for getting
maximum
Tax
Free limit.
- Basic Salary Per Month
- House Rent Allowance