Types of Official Allowances

Official Allowances

Ø  Official allowances are specifically granted to meet expenses incurred wholly and exclusively in connection with performance of duties of an office or employment of profit.

Ø  Official allowances are exempt to the extent expenses have been actually incurred for the specified purpose. If any portion of the official allowance is not spent but saved by The employee, the portion so saved shall be taxable in the hands of the employee.

Type of Official Allowance Daily Allowance

Ø  Daily allowance is given by the employer to the employees for meeting the cost of boarding and lodging when the employee is on official tour away from his normal place of residence.

Ø  Such allowance is given on per day basis, thus it has been named as 'daily allowance'.

Uniform Allowance

Ø  Uniform allowance is given by the employer to the employees to meet the expenditure incurred on purchase or maintenance of uniforms for wear during the performance of the duties of an office or employment of profit.

Conveyance Allowance

Ø  Conveyance allowance is given by the employer to the employees for meeting the expenditure incurred on conveyance during the performance of the. duties of on office or employment of profit.

Helper Allowance

Ø  Helper allowance is given by the employer to the employees for meeting the expenditure incurred on a helper where such helper is engaged during the performance of the duties of an office or employment of profit.

Academic Allowance

Ø  Academic allowance is given by the employer to the employees for encouraging academic, research and training pursuits in educational and research institutions.

Travelling Allowance

Ø  Travelling allowance is given by the employer to the employees to meet the cost of travel on tour or on transfer of duty.

FOREIGN ALLOWANCE -Section 10(7)

Allowances/perquisites paid by the Government (Central Govt/State Govt) to an Indian citizen for services rendered outside India are fully exempt u/s 10(7).

Example: Mr X, a citizen of India, is an IFS officer posted in Indian embassy of Singapore. All allowances/ perquisites received by Mr X shall be exempt in his hands u/s 10(7).

OTHER ALLOWANCES

Other allowances shall be fully taxable in the hands of the employee. Examples are: `;

Ø  Family Allowance

Ø  Telephone Allowance

Ø  Split Duty Allowance

Ø  City Compensatory Allowance (CCA)

Ø  Dearness Allowance (DA)

Ø  Lunch/Tiffin Allowance

Ø  Overtime Allowance

Ø  Medical Allowance

Ø  Servant Allowance

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