Special allowance in Salary in India

Introduction

The salary structure in India has different parts. You must be aware of them as you need to know what benefits you are receiving from an organisation and the cash component. Several special allowances are a part of your salary. We will discuss all of these in detail.

Special Allowance in Salary

A special allowance in salary is a portion of an organisation’s total remuneration paid to its employees. From giant corporations to small proprietorships, all sorts of business entities have this provision of adding a defined and predetermined sum of additional payment to an employee’s wage.

Section 10(14) of the Income Tax Act mentions the provision of a special allowance in salary for employees doing their obligations. The pay is deducted from the total salary. These allowances are entirely based on a worker’s basic wage. As a result, any payment provided in addition to an employee’s compensation may have tax-exempt and taxable elements, with exemptions based on the allowance. Medical allowance exemption is one such example where the allowance is not taxable.

Types of Special Allowance in Salary

There are different types of special allowances in salary. Some of these allowances are listed below:

1. Transport Allowance: Many companies give a transport allowance to all of their employees. You will receive an exemption of Rs.1600 every month in case of travel allowance as a part of a special allowance in salary. In the case of a disabled person, the exemption amount gets doubled.
2. Children Education Allowance: Employees receive an exemption of Rs.100 every month under the Children Education Allowance. The exemption is limited to a maximum of two children.
3. Outstation Allowance: This allowance aims at motivating people to travel by taking some free time out of their work. Companies in the travel domain generally offer this special allowance in salary.
4. Underground allowance: Any employee who works in unfavourable conditions gets up to Rs 800 for working in places like underground mines, etc.

Official Special Allowance in Salary

There are several special allowances in salary that are official and are exempted from tax. Some of these allowances are:

1. Daily Allowance: In this case, employees are paid the daily charges on work travel.
2. Travelling Allowance: This allowance aims to meet the expenses incurred during the trip or if you are relocated to another city for official purposes.
3. Uniform Allowance: If your office mandates you to wear a uniform or if you need to buy some special attire for your official tour, you are given a uniform allowance.
4. Conveyance Allowance: This is one of the most common allowances as the companies try to pay for your travel to the office.
5. Academic Allowance: There might be cases where you might want to do a good course to upskill yourself. The company reimburses a pre-decided portion of the total amount in such a case.

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Medical Allowance Exemption

In the case of medical allowance, you receive a medical allowance exemption in terms of tax. The tax gets exempted on up to Rs.15,000 of medical expenses. Also, the employers reimburse a portion of your medical expenses.