Different types of Allowances

1. Different types of
Different types of
Allowances
Allowances
Presented By;
Presented By;
1)1)Mayur Khatri
Mayur Khatri

2. Mayur Khatri

3. What is Allowance?
What is Allowance?
• A sum of money paid regularly to aA sum of money paid regularly to a
person, typically to meet specifiedperson, typically to meet specified
needs or expensesneeds or expenses
• Allowance are generallyAllowance are generally
Calculated on BasicCalculated on Basic
salarysalary

4. What is Basic Salary?
What is Basic Salary?
Basic salary is the fixed salary, invariable,Basic salary is the fixed salary, invariable,
minimum wages, mandatory pay, fixed by theminimum wages, mandatory pay, fixed by the
company to pay the employees.company to pay the employees.
As per the legislative fixation, 30% to 60% ofAs per the legislative fixation, 30% to 60% of
your salary shall be your basic pay,your salary shall be your basic pay,
i.e., not less than 30% of your gross pay ori.e., not less than 30% of your gross pay or
take home salary and not more than 60%, shalltake home salary and not more than 60%, shall
be basic paybe basic pay
attribution

5. Types of Allowances
Types of Allowances
1.Fully exempted allowances.1.Fully exempted allowances.
2. Partly exempted allowances.2. Partly exempted allowances.
3. Fully taxable allowances3. Fully taxable allowances

6. Dearness Allowance
Dearness Allowance
DA is a cost of living adjustment allowance paid toDA is a cost of living adjustment allowance paid to
Government employees and pensioners in India.Government employees and pensioners in India.
As of June 2012, the Dearness Allowance is calculatedAs of June 2012, the Dearness Allowance is calculated
as a percentage of an Indian citizen's basic salary toas a percentage of an Indian citizen's basic salary to
mitigate the impact of inflation on people belonging tomitigate the impact of inflation on people belonging to
the low income group.the low income group.
The guidelines that govern the DA vary according toThe guidelines that govern the DA vary according to
where one lives (for example, whether rural or urban)..where one lives (for example, whether rural or urban)..
((DA Rates for the Central Government Employees)DA Rates for the Central Government Employees)
(July 01, 2013 Dearness Allowance Rate: 90%)(July 01, 2013 Dearness Allowance Rate: 90%)
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7. House Rent Allowance
House Rent Allowance
HRA is generally paid as component of salaryHRA is generally paid as component of salary
package.This allowance is given by an employerpackage.This allowance is given by an employer
to an employee to meet the cost of renting anto an employee to meet the cost of renting an
accommodation. accommodation.
Least of following exempt from Tax U/SLeast of following exempt from Tax U/S 10(13A)
1. Residential house in Metro city - 50 % of Salary1. Residential house in Metro city - 50 % of Salary
Residential house at other place - 40% of SalaryResidential house at other place - 40% of Salary
2. Actual House rent allowance received.2. Actual House rent allowance received.
3. Rent paid in excess of 10 % of salary.3. Rent paid in excess of 10 % of salary.
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8. Conveyance Allowance
Conveyance Allowance(Transport Allowance)
(Transport Allowance)
The conveyance allowance is a type of allowanceThe conveyance allowance is a type of allowance
which is paid to the employees of the state As well aswhich is paid to the employees of the state As well as
central govt. employees in order to meet the expensescentral govt. employees in order to meet the expenses
to come to office from the residence of the employeesto come to office from the residence of the employees
It varies on the basis of the city of posting, distance ofIt varies on the basis of the city of posting, distance of
the employees from the residence to office & type ofthe employees from the residence to office & type of
conveyance used to travel.conveyance used to travel.
CA is exempted U/S 10(14) read with Rule 2BB uptoCA is exempted U/S 10(14) read with Rule 2BB upto
Rs. 800/- p.m.Rs. 800/- p.m.
If person blind or OD then upto Rs. 1600/- P.m.If person blind or OD then upto Rs. 1600/- P.m.
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9. City Compensatory
City CompensatoryAllowanc
Allowanc
It is an allowance paid by employer to compensateIt is an allowance paid by employer to compensate
high cost incurred by employee work in big cities likehigh cost incurred by employee work in big cities like
Delhi, Mumbai, Bangalore, and other metropolitanDelhi, Mumbai, Bangalore, and other metropolitan
cities.cities.
However, it is a fully taxable allowance. i.e. the amountHowever, it is a fully taxable allowance. i.e. the amount
of this allowance will be taxed with the salaryof this allowance will be taxed with the salary
received.received.
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10. Foreign Allowance
Foreign Allowance
This allowance is paid by the Government of India toThis allowance is paid by the Government of India to
its citizen employees for being posted outside theits citizen employees for being posted outside the
country and it is not included in total income. It iscountry and it is not included in total income. It is
completely tax-free U/S 10 (7).completely tax-free U/S 10 (7).
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11. Helper Allowance
Helper Allowance
Exempt to the extent incurred on helper where suchExempt to the extent incurred on helper where such
helper is engaged for performance of official duties.helper is engaged for performance of official duties.
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12. Pranati Patel

13. Children Education
Children EducationAllowance
Allowance
Children Education AllowanceChildren Education Allowance Paid for education ofPaid for education of
Employee’s children. Exempt up to Rs. 100/- perEmployee’s children. Exempt up to Rs. 100/- per
month per child up to maximum of 2 child if Expensesmonth per child up to maximum of 2 child if Expenses
made in India.made in India.
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14. Children Hostel
Children HostelAllowance
Allowance
Children Hostel AllowanceChildren Hostel Allowance Paid for education ofPaid for education of
employee’s children. Exempt up to Rs. 300/- peremployee’s children. Exempt up to Rs. 300/- per
month per child up to maximum of 2 child if expensesmonth per child up to maximum of 2 child if expenses
made in India.made in India.
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15. Tiffin/Lunch Allowance
Tiffin/Lunch Allowance
Tiffin / Lunch Allowance It is fully taxable. It is given to
employees for lunch as coupons or added as part of
salary.
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16. Non Practicing
Non PracticingAllowance
Allowance
Non practicing Allowance This is normally given toNon practicing Allowance This is normally given to
those professionals (like medical doctors, charteredthose professionals (like medical doctors, chartered
accountants etc.) who are in government service andaccountants etc.) who are in government service and
are banned from doing private practice. It is toare banned from doing private practice. It is to
compensate them for this ban. It is fully taxable.compensate them for this ban. It is fully taxable.
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17. Overtime Allowance
Overtime Allowance
Overtime Allowance When an employee works forOvertime Allowance When an employee works for
extra hours over and above his normal hours of duty,extra hours over and above his normal hours of duty,
he is given overtime allowance as extra wages. It ishe is given overtime allowance as extra wages. It is
fully taxable.fully taxable.
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18. Retaining Allowance
Retaining Allowance
It means an allowance payable for the time being toIt means an allowance payable for the time being to
an employee of any factory or other establishmentan employee of any factory or other establishment
during any period in which the establishment is notduring any period in which the establishment is not
working, for retaining his servicesworking, for retaining his services
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19. Medical Allowance
Medical Allowance
Medical Allowance is a fixed monthly allowance which
forms a part of Salary. It is paid as a fixed amount which is
determined as per the company’s policy where an
individual is employed and it has no relevance with the
medical expenses incurred.
Medical Allowance is added in taxable income under the
head “Salaries” and it is fully taxable.
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20. Entertainment
EntertainmentAllowance
Allowance
Money which given by employer is allowed by his or herMoney which given by employer is allowed by his or her
company to spend on meals with visitorscompany to spend on meals with visitors
In the case of a Government employee (i.e., CentralIn the case of a Government employee (i.e., Central
Government or a State Government employee), the least ofGovernment or a State Government employee), the least of
the following is deductible:the following is deductible:
Rs. 5,000/-Rs. 5,000/-
20% of basic salary ; or20% of basic salary ; or
Amount of entertainment allowance granted during theAmount of entertainment allowance granted during the
previous year.previous year.
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21. Uniform Allowance
Uniform Allowance
Any allowance, which is granted to meet theAny allowance, which is granted to meet the
expenditure incurred on purchase or maintenance ofexpenditure incurred on purchase or maintenance of
uniforms to wear during the performance of the dutiesuniforms to wear during the performance of the duties
of an office.of an office.
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