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) Duty Allowance
Station Allowance Uniform Allowance
Entertainment Allowance Acting allowance
Subsistence Allowance Overtime Allowance
Meal Allowance Housing Allowance
Security and Telephone Allowance Saving Scheme (Banks DIH)
Taxable in all Non-Governmental Organisations

  • Medical and Dental Expenses
  • Gratuity
Taxable in all Non-Governmental Organisations

  • Medical and Dental Expenses
  • Gratuity
Leave Entitlement (Vacation Allowance) Laundry
Severance Pay
Hardline

Note: All allowances are non-taxable for Judges