Income tax/IT Form 12BB

Allowances Help Tips


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Exemptions and Taxability of allowances to Salaried employees while computing taxable income:

S. No. Section Particulars Exemption Limit Exemption to
1 Any allowance or perquisite paid or allowed by Government to its employees posted outside India Entire Amount Individual- Salaried Employee (citizen of India)
2 - Allowances to Judges of High Court/Supreme Court Exempt, subject to certain conditions. Individual - Judges of High Court/Supreme Court
3 - Compensatory allowance received by a Judge under article 222(2) of the Constitution Fully Exempt Individual - Judges
4 - Salary and allowances received by a teacher /professor from SAARC member state (Subject to certain conditions). Fully Exempt Individual - Teacher from SAARC member State
5 10(45) Following allowances and perquisites given to serving Chairman/Member of UPSC is exempt from tax: Fully Exempt Individual - Chairman/Member of UPSC
  a) Value of rent free official residence
  b) Value of conveyance facilities including transport allowance
  c) Sumptuary allowance
  d) Leave travel concession
6 10(45) Allowances to Retired Chairman/Members of UPSC Exempt subject to maximum of Rs. 14,000 per month for defraying the services of an orderly and for meeting expenses incurred towards secretarial assistant on contract basis. Individual - Retired Chairman/Member of UPSC
7 - Allowances paid by the UNO to its employees Fully Exempt Individual - Government employee Individual - Employees of UNO
8 16 (ii) Entertainment Allowance received by the Government employees (Fully taxable in case of other employees) Least of the following is exempt from tax: Individual - Government Employee
a) Rs 5,000
b) 1/5th of salary (excluding any allowance, benefits or other perquisite)
c) Actual entertainment allowance received
9 10(13A) House Rent Allowance (Sec. 10(13A) & Rule 2A) Least of the following is exempt: Individual - Salaried employee
a) Actual HRA Received
b) 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Madras)
c) Rent paid minus 10% of salary
* Salary= Basic + DA (if part of retirement benefit) + Turnover based Commission.
Note:
  i. Fully Taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent
 ii. It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than Rs. 1,00,000 [Circular No. 08 /2013 dated 10th October, 2013].
10 10(14) Children Education Allowance Up to Rs. 100 per month per child up to a maximum of 2 children is exempt -do-
11 10(14) Hostel Expenditure Allowance Up to Rs. 300 per month per child up to a maximum of 2 children is exempt -do-
12 10(14) Transport Allowance is granted to an employee to meet expenditure on commuting between place of residence and place of duty Up to Rs. 1,600 per month (Rs. 3,200 per month for blind, deaf, dumb and handicapped employees) is exempt -do-
13 Sec. 10(14) Allowance granted to an employee working in any transport business to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided employee is not in receipt of daily allowance. Amount of exemption shall be lower of following: -do-
  a) 70% of such allowance; or
  b) Rs. 10,000 per month.
14 10(14) Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office Exempt to the extent of expenditure incurred for official purposes -do-
15 10(14) Any Allowance to meet the cost of travel on tour or on transfer -do- -do-
16 10(14) Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty -do- -do-
17 10(14) Helper/Assistant Allowance -do- -do-
1 10(14) Research Allowance granted for encouraging the academic research and other professional pursuits -do- -do-
2 10(14) Uniform Allowance -do- -do-
3 Sec. 10(14) Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations) Amount exempt from tax varies from Rs. 300 per month to Rs. 7,000 per month. -do-
4 Sec. 10(14) read with Rule 2BB Border area allowance Remote Locality or allowance or Disturbed Area allowance or Difficult Area Allowance (Subject to certain conditions and locations) Amount exempt from tax varies from Rs. 200 per month to Rs. 1,300 per month. -do-
5 Sec. 10(14) Tribal area allowance in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Orissa Up to Rs. 200 per month -do-
6 Sec. 10(14) Compensatory Field Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations) Up to Rs. 2,600 per month -do-
7 Sec. 10(14) Compensatory Modified Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations) Up to Rs. 1,000 per month -do-
8 Sec. 10(14) Counter Insurgency Allowance if this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations) Up to Rs. 3,900 per month Individual - Members of Armed Forces
9 Sec. 10(14) Underground Allowance is granted to employees working in uncongenial, unnatural climate in underground mines Up to Rs. 800 per month Individual - Salaried employee
10 Sec. 10(14) High Altitude Allowance is granted to armed forces operating in high altitude areas (Subject to certain conditions and locations)  a) Up to Rs. 1,060 per month (for altitude of 9,000 to 15,000 feet) Individual - Members of Armed Forces
   b) Up to Rs. 1,600 per month (for altitude above 15,000 feet)
11 Sec. 10(14) Highly active field area allowance is granted to members of armed forces (Subject to certain conditions and locations) Up to Rs. 4,200 per month -do-
12 Sec. 10(14) Island Duty Allowance is granted to members of armed forces in Andaman and Nicobar and Lakshadweep group of Island (Subject to certain conditions and locations) Up to Rs. 3,250 per month -do-
13 - City Compensatory Allowance Fully Taxable Individual - Salaried employee
14 - Fixed Medical Allowance -do- -do-
15 - Tiffin/Lunch/Dinner/Refreshment Allowance -do- -do-
16 - Servant Allowance -do- -do-
17 - Dearness Allowance -do- -do-
18 - Project Allowance -do- -do-
19 - Overtime Allowance -do- -do-
20 - Telephone Allowance -do- -do-
21 - Holiday Allowance -do- -do-
22 - Any Other Cash Allowance -do- -do-