A. Fully Exempted Allowances:
Foreign Allowance given by Govt. to its employees posted abroad. HRA given to Judges of High Court & Supreme Court.
B. Fully Taxable Allowances:
(i) Dearness Allowance / Additional D.A. / High Cost of Living Allowance -- Fully Taxable.
(ii) City Compensation Allowances (CCA).
(iii) Capital Compensatory Allowance
(iv) Lunch Allowance
(v) Tiffin Allowance
(vi) Marriage / Family Allowance
(vii) Overtime Allowance
(viii) Fixed Medical Allowance.
(ix) Electricity and Water Allowance
(x) Entertainment Allowance. It is fully added in employee’s Salary.
In case of Government employees a deduction is u/s 16(ii) at the rate of least of following :
(a) Statutory Limit Rs. 5,000 p.a.
(b) 1/5 (20%) th of Basic Salary ; or
(c) Actual Entertainment Allowance received.
C. Partly Taxable Allowances:
1. House Rent Allowance ( HRA)
(a) Fully Exempted, if received by of High Court and Supreme Court.
(b) Fully Taxable, if received by an employee who is living in his own house or in a house for which no rent is paid.
(c) Exempted upto least of following for those employees who are living in rented houses:
(i) Actual HRA received by the employee.
(ii) Rent paid - 10% of Salary ; or
(iii) 40% of Salary in ordinary town ; 50% of Salary in Mumbai, Kolkata, Chennai or Delhi.
Ø Taxable HRA = HRA Received - Least of Above.
Ø Salary = Pay + D.A. which enters into Pay for Service or + Commission on Turnover Achieved by Him.
Following Allowances are Exempted upto actual expenditure incurred for employment. Excess, if any, shall be taxable...
2. Uniform Allowance
3. Conveyance Allowance
4. Traveling Allowance
Following Allowance are Exempted up to amount so notified..
5. Special Compensatory Allowance
6. Border Area Allowance
7. Tribal Area Allowance -- Exempted upto Rs. 200 p.m. if received in the States of M.P., Tamil Nadu, U.P., Karnataka, Tripura, Assam, West Bengal, Bihar, or Orissa.
8. Children’s Education Allowance -- Exempted up to Rs.100 p.m. per child for education in Indiaof own two children only.
9. Hostel Expenditure Allowance -- Exempted up to Rs. 300 p.m. per child for Hostel expenditureon own two children only.