3,200 per month granted to an employee, who is blind or deaf and dumb or orthopedically handicapped with disability of lower extremities Transport Allowance granted to an employee to meet expenditure for the purpose of commuting between place of residence and place of duty 300 per month per child up to a maximum of 2 children is exempt 100 per month per child up to a maximum of 2 children is exempt It does not prescribe an upper limit for the allowance than an employer can offer.Įxemption Limits Special Allowance Under Section 10(14)
The Income Tax Act provides the limit for exemption. The exemption is limited to the amount received by the employee and actually spent for that purpose. Offered solely for the purpose of to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit. The payment is not in the nature of a perquisite. However, the following conditions must be met: While others are either partially exempt or fully exempt. To begin with, a few allowances are fully taxable. The categories of special allowances can be divided into 2 types. Any such allowance either to meet his personal expenses at the place of office or employment or at the place where he ordinarily resides, or to compensate him for the increased cost of living. It is exempt to the extent to which such expenses are actually incurred for that purpose. The grant is specifically to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit. Any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17. Special allowances are exempt from tax under section 10(14) of the Income Tax Act, 1961. Since it forms a part of the salary it is taxable in the hands of the employee. You can know the details of the allowance either in the offer letter or monthly pay slip. The amount varies from one company to another as per the need. They incur these expenses while performing their duties of an office or employment of profit. 
The special allowance is offered to the employees to enable them in meeting their expenses. However depending on the type of allowance, it is either exempt or taxable. These allowances are a part of the salary and hence taxable. The objective is to meet the specific requirements of the employees. The employers pay it over and above the basic pay and dearness allowance. It is a fixed amount of money that an employer offers to its employees.
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