Taxable Allowance

Taxable allowances are part of an employee’s salary which are taxable under the Income Tax Act. An allowance is a fixed amount of money received by a salaried employee from his employer to meet a particular type of expenditure over and above salary.

Allowances are treated as part of the salary and are taxable, except for those for which specific exemptions have been provided under various sections of the Income Tax Act. It is a financial benefit given by an employer to an employee in the form of a salary component thus it becomes part of the salary structure.

Income tax laws have made some allowances fully taxable, some partly taxable, and some tax-free.

The taxable allowances include:

  • Dearness Allowance
  • Entertainment Allowance
  • Overtime allowance
  • City compensatory allowance
  • Interim Allowance
  • Project Allowance
  • Tiffin/meals allowance
  • Uniform allowance
  • Cash allowance
  • Non-practicing allowance
  • Warden allowance
  • Servant allowance