Section 10 of the ITA (Income Tax Act) highlights all the exemption provisions for various paid allowances. A taxpayer can opt for these when paying for income tax. You can also find special exempted allowances and the terms and conditions applicable for availing them.
What are the Exempt Allowances under Section 10?
The special allowances granted under ITA’s Section 10 are divided into two parts: Section 10 (14)(i) and Section 10 (14)(ii). Below, we have tabulated the categories and the limit of their allowances eligible for exemption.
Allowances under Section 10 (14)(i)
This subsection lists the exemptions towards allowances and benefits provided to employees to meet expenses.
|Travelling allowance||Covers for all costs of travel on tour or on the transfer of duty|
|Daily allowance||Any expenses incurred by an employee during their absence from the usual place of duty|
|Helper allowance||If you have hired external help for fulfilling work-related obligations, their allowance will be exempted from taxes|
|Conveyance allowance||The allowance incurred on the conveyance for the benefit of employment is allowed exemption|
|Academic allowance||Any costs granted to meet the academic or research-based expenditures qualify for exemption|
|Uniform allowance||The expenses arising from the purchase or maintenance of uniform use on the performance of duty|
The maximum allowance granted under these provisions will depend on the actual amount spent or the sum received. Out of the two, you will be paid for whichever costs less. For example, if your pre-set helper allowance is Rs. 2,500 but you only pay Rs. 2,200 to your helper, you will be paid the latter amount.
Allowances under Section 10 (14)(ii)
The allowances under this subsection are specified for salaried individuals on official duty.
|Allowance category||Details||Limit of allowed exemption|
|Border area allowance||The allowance offered to army personnel who are residents of border areas and disturbed or difficult areas||Amounts can range from Rs. 200 to Rs. 1300 per month|
|Tribal area allowance||Eligible allowance for tribal, schedule and agency areas in Madhya Pradesh, Assam, Uttar Pradesh, Karnataka, West Bengal,Bihar, Orissa, Tamil Nadu, and Tripura||Rs. 200 per month|
|Compensatory field area allowance||Available for various areas of Arunachal Pradesh, Manipur, Sikkim, Nagaland, Himachal Pradesh, Uttar Pradesh, Jammu and Kashmir||Rs. 2,600 per month|
|Compensatory modified field area allowance||Available in specified areas of Punjab, Rajasthan, Haryana, Uttar Pradesh, Jammu and Kashmir, Himachal Pradesh, West Bengal and North Eastern states||Rs. 1,000 per month|
|Climate allowance||Special compensatory allowance for hilly areas/high altitudes||The exemption-free amount may vary from Rs. 300 to Rs. 7,000 per month|
|Transport allowance (for physically disabled)||Available to physically disabled employees for the purpose of commute||Rs. 3,200 per month|
|Counter insurgency allowance||Available to the armed forces members||Rs. 3,900 per month|
|Underground allowance||Available for employees working in underground mines||Rs. 800 per month|
|Transport system allowance||Available to transportation employees to fulfil personal expenditures while on duty||70% of such allowance up to a limit of Rs. 10,000 per month|
|Children education allowance||Available to armed forces personnel having children||Rs. 100 per month for up to two children|
|Hostel expenditure allowance||Available to armed forces personnel having children||Rs. 300 per month for up to two children|
|High altitude allowance||Available to armed forces operating in higher altitudes||Rs. 1,060 per month (for altitudes ranging between 9,000-15,000 feet)|
Rs. 1,600 per month (for altitudes ranging higher than 15,000 feet)
|Island duty allowance||Available for armed forces serving in Andaman & Nicobar and Lakshadweep Islands||Rs. 3,250 per month|
|Active field area allowance||Special allowance available to armed forces operating in highly active fields||Rs. 4,200 per month|
The listed allowances are exempted on the basis of the amount received or the specified limit, whichever is lesser.
Additional Exempt Allowances under Section 10
Apart from the allowances mentioned above, another set of expenses is eligible for exemption. These are as follows:
- Allowances offered to Indian government employees rendering outside the country
- Allowances offered to high court judges
- Sumptuary allowances offered to high court and supreme court judges
- Allowance received by the employer’s UNO (United Nations Organisation)
Other than special allowances, the ITA Section 10 also has other subsections concerning the exemption of incomes that aren’t a part of the total salary. It helps in decreasing the tax burden on salaried workers. Any person who pays taxes on their salary much be aware of this section to be able to enjoy its benefits.
Also Read: Section 80C of Income Tax