An allowance is a fi­xed amount of money or an in-kind benefit given to an employee for the purpose of performing a specifi­c task by an employer. An allowance is also given as a form of compensation for some unusual conditions of employment. An allowance which is usually an addition to an employee’s salary is subject to tax unless it is specifically exempt by law.

Below is the list of allowances subject to and exempt from Income Tax.

Non- Taxable Allowances Taxable Allowances
Travelling Allowances (as opposed to transportation allowance)

Station Allowance

Entertainment Allowance

Subsistence Allowance

Meal Allowance

Security and Telephone Allowance

 

Taxable in all Non-Governmental Organisations

  • Medical and Dental Expenses
  • Gratuity

Leave Entitlement (Vacation Allowance)

Severance Pay

Hardline

Duty Allowance

Uniform Allowance

Acting allowance

Overtime Allowance

Housing Allowance

Saving Scheme (Banks DIH)

 

Taxable in all Non-Governmental Organisations

  • Medical and Dental Expenses
  • Gratuity

Laundry