Taxable Allowance
Taxable allowances are those allowances which are part of salary and are not exempted under any section of Income Tax Act. These are taxed as per the tax slab of the employee. Here are few commonly known taxable allowances:
- Dearness Allowance: Dearness Allowance is mostly paid to employees over the basic salary to manage inflation and as an adjustment towards the cost of living expenses. The income tax act clearly mentions that tax liability for Dearness Allowance will be calculated along with salary. Therefore, one must declare the same while filing income tax returns.
- Entertainment Allowance: This allowance is paid to employees for the expenses incurred towards hospitality of their customers for meals, drinks, hotels, client meetings and more. This allowance is completely taxable for private employees.
- Medical Allowance: This allowance is paid for the medical expenses incurred by the employee. This was partially exempted (Up to Rs. 15,000) till last year, however, from FY 2018-19 this allowance is fully taxable
The other allowances which are taxable in nature are:
Interim Allowance, Tiffin / Meal Allowance, Project Allowance, Cash Allowance, Servant Allowance, Project Allowance, Telephone Allowance, Holiday allowance, Overtime Allowance and City Compensatory Allowance.
