Special Allowances And Deduction U/s 10

Under Section 10, individuals are given certain special allowances for the amount they spent for specific purposes. Apart from the net salary, an employee receive various allowances for specific purposes such as Travel allowances, house rent, uniform allowances, etc.

The special allowances that are given to the employees are due to certain specified conditions. Either the allowances are given to the employee for exemplary services or working in unusual conditions or extra hours. Several different allowances will provide a deduction under Section 10.

There are different subsection under Section 10 (14) which determine the exact deduction criterion for different allowances. The exact amount which determines the deductions are:

  • Allowance Amount
  • The actual amount which is spent on the purpose for which the allowance is given

Section 10 (14) (i)

Allowances are exempted for the allowance amount given or the actual amount which is spent on the purpose for which the allowance is given, whichever is the lowest of the two.

Different Allowance which comes under this section are:

  • Daily Allowance
  • Travel Allowance
  • Research/Academic Allowance
  • Conveyance Allowance
  • Helper Allowance
  • Uniform Allowance

Certain individuals also receive allowances exempt under Section 10:

  • High Court Judges.
  • UNO employee.
  • Supreme Court and High Court Judge.
  • Government employees who are Indian citizens, working abroad.

Deductions For Different Allowances Under Section 10

Sections Particulars Exemption limit
Sec 10(1) Agricultural Income
(from agricultural land,
farm house, or sapling
seedling grown in nursery) for self employed
Fully exempt from tax
Sec 10(2) Income received from
HUF (Hindu-undivided
family) by a tax payer in his
capacity as a member of
Fully exempt from tax
Sec 10(10C) Compensation received
at the time of voluntary
retirement for salaried
Exempt from tax up to a
certain limit of
compensation amount
Rs. 5,00,000
Sec 10(10D) Amount received under
life insurance policy
including policy bonus
Fully exempt from tax
Sec 10(11)(12) Amount withdrawn from Provident fund by salaried employees Fully exempt from tax
Sec 10(10BC) Compensation received
in case of any disaster
from central government
Fully exempt from tax
Sec 10(13A) House rent allowance
(HRA) to salaried
employees (rent paid by
the employees to stay in a
rented house)
Fully exempt from tax
and 50% of salary amount
if residential house is in
metro cities otherwise
40% in non-metro
Sec 10(14) Children education
allowance (salaried
employees can claim a
predefined allowance for
two children)
Exemption up to Rs. 100 per month per child
Sec 10(14) Special compensatory
allowance for hilly areas or climate allowance or high altitude allowance to
salaried employees
Exemption up to
Rs. 7,000 per month
Sec 10(14) rule 2BB Border area allowance or remote area or any
disturbed area allowance to salaried employees
Exemption up to
Rs. 1,300 per month
Sec 10(14) Tribal area allowance in: Madhya Pradesh,
Tamilnadu, Assam, UP,
Karnataka, West Bengal,
Bihar, Orissa and Tripura
to salaried employees
Exemption up to
Rs. 200 per month
Sec 10(14) Compensatory field area allowance available in
various areas of AP,
Manipur, Sikkim,
Nagaland, HP, UP and J&K to salaried employees
Exemption up to
Rs. 2,600 per month
Sec 10(14) Transport allowance
granted to employee for
the purpose of commuting from home to office
salaried employees
Exemption up to
Rs. 1,600 (Rs. 3,200 for
blind, deaf and dumb) per month
Sec 10(15) Income from tax free
securities to all assesses
(Income received as
interest from securities,
bonds, deposits notified by government)
Fully exempt from tax
Sec 10(23D) Income from mutual fund (Any income earned from mutual funds registered
under SEBI or set-up by any PSU or authorized by
Fully exempt from tax
Sec 10(34) Income from dividends
(Tax paid by the company
over the profits is
considered as the final
payment of tax no further
credit to be claimed as
Fully exempt from tax
Sec 10(38) Long term capital gains on transfer of shares and
Fully exempt from tax
Sec 10(43) Reverse Mortgage (Any
amount received by the
individual as loan in
lumpsum or in installments in transaction of reverse
Fully exempt from tax
Sec 10(44) New Pension System
exemption (Any income
received by any person on the behalf of New pension system)
Fully exempt from tax
Sec 10(49) Income of National
financial holdings company
Fully exempt from tax

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