The Gross salary of a person includes various benefits given by his employer with different names. These benefit could be monetary or non monetary. Generally we call these benefits as allowances. Allowances which are necessary and which give us the most tax benefit are included in salary structure. We are discussing here the allowances which are fully exempt from tax if they are actually spent on performance of duties. So to plan for your taxes on income from salary, you can take note of following special allowances exempt u/s 10(14) to the extent spent for official performance of duties. These are called special Salary allowances exempt u/s 10(14) & rule 2bb.
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Any salary allowances granted and spent to meet the cost of :-
- Travelling Allowances : These allowance can be given when an employee frequently goes for travel. So any expenditure on travel or Tour or on Transfer will be fully exempt. The employee will have to provide all the bills/invoices as proof of actual expenditure. He has another option to claim the reimbursement of the expenditures instead of including it as allowance in his salary
- Conveyance allowance : Granted to meet the expenditure incurred on conveyance in the performance of the duties. Max Rs. 1600/-P.M. and for Phy.disable person Rs. 3200/- P.M.
- Helper Allowances : Expenditure incurred on a helper in the performance of duties.
- Academic Allowance : The academic, research and training pursuits in educational and research institutions
- Uniform Allowances: Purchase or maintenance of uniform for wear during the performance of duties. As per some of the decided case laws it is held that expenditure on those uniform can only be claimed as allowances which was necessary to perform the duties.
These all above mentioned allowances can used while formulating the salary structure of an employee/Director. These special allowances exempt u/s 10(14) are fully exempt provided they are actually spent on the performance of duties. While deducting TDS under section 192, your employer will ask for all bills/invoices/evidence related to these special allowances exempt u/s 10(14).
The other important salary allowances which are fully exempted irrespective of the expenditure incurred on it are as follows:
- Children Education Allowance: It is a cash allowance given to an employee for meeting the cost of education of his children. It is exempt up to Rs. 100 p.m per child, restricted to two children. So you can claim up to Rs. 2400/- for a year.
- Children Hostel Expenditure Allowance : The allowance is given to meet the hostel expenditure of the Employee’s children. This is exempt up to Rs. 300 p.m per child, restricted to two children. So you can claim up to Rs.
- Transport Allowance : It is given to meet the Employee’s expenditure for travelling from his residence to office and back. This is exempt up to Rs. 1600/- p.m (From F.Y 2015-16 ) or Rs. 32000/- ( From F.Y 2015-16 ) .
This three allowances can be claimed up to the exempt limit irrespective of the expenditure incurred on it and no need to provide the proof of expenditure.
