TAXATION LAWS AND

PRACTICES
PARTLY EXPEMTED ALLOWANCES
 ALLOWANCES (SEC 10)

An allowance is a fixed amount of money received by a sa

laried employee from his employer to meet a particular ty
pe of expenditure over and above salary.
 ALLOWANCES

• Fully Taxable Allowances: Allowances which are considered as part

of the employee’s salary and do not get the benefit of partial or full e
xemption under a section of the Income Tax.

• Fully Exempted Allowances: The allowances given to an employee w

hich form a part of their salary but are fully exempted from tax

• Partly Taxable Allowances: The allowances which are partially exem

pted from tax to a certain limit
PARTLY EXEMPTED ALLOWANCES

1. House Rent Allowance 2. Transport Allowance

3. Entertainment Allowance 4. Medical Allowance

5. Children Education Allowance

6. Hostel Expenditure Allowance

 Entertainment Allowance
Amount of money given to an employee to make payments towards hospitality of their customers

TREATMENT

• Given to the Government employees only

• Least of the following is deductible:

a.) ₹ 5,000
b.) 1/5th of salary
c.) Actual Entertainment Allowance received
 House Rent Allowance (HRA)
Paid to the employee by the employer to compensate the accommodation expenses.

TREATEMENT

First added to the salary and then the least of the following is exempted:
a.) Actual HRA received

b.) 50% of salary (Mumbai, Delhi, Chennai, Kolkata) or,

40% of salary (for other cities)

c.) (Rent paid) – (10% of salary)

 Transport Allowance
Paid for commuting between place of residence and place of duty

TREATEMENT

• Up to ₹ 1,600 per month exempted

• Up to ₹ 3,200 per month exempted for differently-abled employees

Hostel Expenditure Allowance

Paid by an employer for hostel charges for employee’s children

TREATEMENT

• Up to ₹300 per month per child up to a maximum of 2 children is exempted

 Children Education Allowance
Paid by an employer for employee’s children education.

TREATEMENT

• Up to ₹ 100 per month per child up to a maximum of 2 children is exempted

 Medical Allowance
Paid by an employer when the employee or any of his family members fall sick and
requires prolonged medical treatment.

TREATEMENT

• Up to ₹ 15,000 exempted

• Employee’s or his/her close family member

• Fully taxable if exceeds ₹ 15,000

CONCLUSION