Types of allowances

What is allowance?

Any monetary benefit offered by the employer to its employees for meeting expenditures, over and above the basic salary are known as Salary Allowances. Allowances are the financial benefit given to the employee over and above the monthly salary. Allowances are particular in nature and are provided to meet the specific requirements of employees.
Types of Allowances
1. Taxable Allowances
2.Non - Taxable Allowances
3. Partially Taxable Allowances
1. Taxable Allowance
Taxable allowances are those allowances which are part of salary and are not exempted under any section of Income Tax Act. These are taxed as per the tax slab of the employee. Here are few commonly known taxable allowances:
a. Dearness Allowance:
b. Entertainment Allowance:
c. Medical Allowance:  
e. Project Allowance 
f. Tiffin/Meals Allowance
g. Cash Allowance 
h. Non-Practicing Allowance 
i. Warden Allowance 
j. Servant Allowance 
k. Transport allowance
l. Other Taxable allowances 
2. Non - Taxable Allowances
a. Uniform Allowance:
b. Allowances Paid to Government Employees Abroad 
c. Allowances Paid to UNO
d. Allowances Judges of the High Court and Supreme Court 
e. Compensatory Allowances 
f. Sumptuary allowance
g. Helper Allowance 
h. Other Tax Free Allowances 
3. Partially Taxable Allowances:
a. House Rent Allowance - HRA is a special allowance specifically granted to an employee by his employer towards payment of rent for residence of the As per the Sec 10 (13A), the least of the following is exempted, and rest amount is taxable.
Actual HRA received
Rent Paid – 10% (Basic salary + DA)
40% of salary ( basic + DA) and 50% in metro cities like Mumbai, Kolkata, Delhi, or Chennai)
Exemption is not available to an assessee who lives in his own house, or in a house for which he has not incurred the expenditure of rent.
b. Children Education Allowance - This allowance is granted towards the expenses incurred on a child’s education. This is exempted up to Rs. 100 per month per child up to a maximum of 2 children.
c. Hostel Expenditure Allowance - This allowance is granted to employees for the expenses incurred on the hostel fees of their child. This is exempted up to Rs. 300 per month per child up to a maximum of 2 children.
d. Transport allowance - Any transport allowance granted to an employee who is blind or deaf and dumb or orthopedically handicapped with disability of the lower extremities of the body, to meet his expenditure for commuting between his residence and place of duty is exempt upto rs 3200 per month.
e. Underground Allowance- 
f. Conveyance Allowance Exemption Limit –
g. Leave Travel Allowance

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