An employee may receive various allowances along with the basic salary as a part of his salary. He needs to offer such allowances for taxation.
However, few allowances relate to actual problems that employees face like when the employees need to work to Hilly areas or Tribal areas. Some allowances relates to necessity, example educational of children.
Government has provided incentives by providing exemption for few of the allowances. The list along with limits is given below for reference.
| S.
No. |
Name of Allowance | Extent to which allowance is exempt. |
| 1. | Any Special Compensatory Allowance in the nature of Special Compensatory (Hilly Areas) Allowance or High Altitude Allowance or Uncongenial Climate Allowance or Snow Bound Area Allowance or Avalanche Allowance | Rs. 800 or
Rs. 300 per month depending upon the specified locations. Rs. 7,000 per month in Siachen area of Jammu and Kashmir. |
| 2. | Any Special Compensatory Allowance in the nature of border area allowance or remote locality allowance or difficult area allowance or disturbed area allowance | Rs. 1,300 or
Rs. 1,100 or Rs. 1,050 or Rs. 750 or Rs. 300 or Rs. 200 per month depending upon the specified locations. |
| 3. | Special Compensatory (Tribal Areas
/ Schedule Areas / Agency Areas) Allowance [Specified States] |
Rs. 200 per month |
| 4. | Any allowance granted to an employee working in any transport system to meet his personal expenditure during his duty performed in the course of running such transport from one place to another, provided that such employee is not in receipt of daily allowance | 70% of such allowance upto a maximum of Rs. 10,000 per month. |
| 5. | Children Education Allowance | Rs. 100 per month per child upto a maximum of two children |
| 6. | Any allowance granted to an employee to meet the hostel expenditure on hischild | Rs. 300 per month per child upto a maximum of two children |
| 7. | Compensatory Field Area Allowance [Specified areas in Specified States]
Exemption Special Compensatory Allowance shall not be allowed. |
Rs. 2,600 per month |
| 8. | Compensatory Modified Field Area Allowance [Specified areas in Specified States]
Exemption Special Compensatory Allowance shall not be allowed. |
Rs. 1,000 per month |
| 9. | Any special allowance in the nature of counter insurgency allowance granted to the members of the armed forces operating in areas away from their permanent locations.
Exemption Special Compensatory Allowance shall not be allowed. |
Rs. 3,900 per month |
| 10. | 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 | Rs. 3,200 per month. |
| 11. | Underground Allowance granted to an employee who is working in uncongenial, unnatural climate in underground mines. | Rs. 800 per month |
| 12. | Any special allowance in the nature of high Altitude allowance granted to the member of the armed forces operating in high altitude areas
For altitude of 9,000 to 15,000 feet For above 15,000 feet |
Rs. 1,060 per month Rs. 1,600 per month |
| 13. | Any special allowance in the nature of special compensatory highly active field area allowance granted to the member of the armed forces | Rs. 4,200 per month |
| 14. | Any special allowance in the nature of Island (duty) allowance granted to the member of the armed forces in Andaman & Nicobar and Lakshadweep Group of Islands | Rs. 3,250 per month |
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