The following allowances are exempt under section 10(14) to the extent the amount is utilised for the specified purpose for which the allowance is received . In other words, in the cases given below the amount of exemption under section 10(14) is :
a. The amount of the allowance ; or
b. The amount utilised for the specific purpose for which allowance is given,
whichever is lower.
1. Children Education Allowance: If you are receiving children education allowance from your employer then you are eligible to claim a tax exemption under the Income Tax Act. However, the maximum amount exempted is Rs. 100 per month or Rs. 1200 per annum for maximum of up to 2 children.
2. Hostel Expenditure Allowance: Similarly, any hostel expenditure allowance received by you for your children from employer is eligible for exemption up to Rs. 300 per month or Rs. 3600 per annum for maximum up to 2 children.
3. Any allowance to meet the expenditure on a helper where such helper is engaged for the performance of official duties.
4. Leave Travel Allowance (LTA) : Any travel concession or assistance received by employee from his employer for himself and his family to cover expenses incurred in travelling while on leave.
For the purpose of this section, family includes:
a. Spouse of individual
b. Children of individual
c. Parents of individual (mainly or wholly dependent on the individual)
d. Brothers and sisters of individual (mainly or wholly dependent on the individual)
Exemption is allowed for only two travels within a block of four years.
5. Uniform Allowance : Any allowance granted to meet the expenditure incurred on the purchase or maintenance of uniform for wear during the performance of the duties of an office or employment of profit.
The income tax authorities have, on more than one occasion, held that allowances for clothing shall be fully taxable unless the organization has a defined policy for employee uniform.
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