Page 184 - DCOM301_INCOME_TAX_LAWS_I

Unit 7: Income under the Head Salaries

Notes

`

Source: http://www.incometaxmanagement.com/Pages/Graphical-ITax/Entertainment-Allowance-
Salary.html

!
Caution Entertainment allowance first included in the salary income under the head of
Salaries and after that dedication is provided as per above limit.

3. Special Allowances for Meeting Official Expenditure: These allowances are specifically
granted to meet expenses wholly and exclusively incurred in the performance of official
duty. These are exempt to the extent such expenses are actually incurred or the amount
received whichever is less. These allowances are Travelling allowance, Daily allowance,
Helper allowance, Academic allowance, Uniform allowance etc.
4. Special Allowances to Meet Personal Expenses: There are certain allowances given to the
employees for specific personal purposes and the amount of exemption is fixed i.e. not
dependent on actual expenditure incurred in this regard. These allowances include:
(a) Children Education Allowance: This allowance is exempt to the extent of ` 100 per
month per child for maximum of 2 children.
(b) Children Hostel Allowance: Any allowance granted to an employee to meet the hostel
expenditure on his child is exempt to the extent of ` 300 per month per child for
maximum of 2 children.
(c) Transport Allowance: This allowance is generally given to government employees to
compensate the cost incurred in commuting between place of residence and place of
work. An amount upto ` 800 per month paid is exempt. However, in case of blind
and orthopaedically handicapped persons, it is exempt up to ` 1,600 p.m.
(d) Out of Station Allowance: An allowance granted to an employee working in a transport
system to meet his personal expenses in performance of his duty in the course of
running of such transport from one place to another is exempt upto 70% of such
allowance or ` 6,000 per month, whichever is less.

7.3.3 Fully Exempt Allowances

Some of the allowances which are fully exempted from tax in hands of employee are:
1. Foreign Allowance: This allowance is usually paid by the government to its employees
being Indian citizen posted out of India for rendering services abroad. It is fully exempt
from tax.

LOVELY PROFESSIONAL UNIVERSITY 179