Section 10(14)(i) and (ii) of the Income Tax Act

 Section 10(14)(i)

Under Section 10(14)(i) of the Income Tax Act, allowances granted to an employee to meet specific, necessary expenses incurred wholly and exclusively for the performance of official duties are exempt from income tax. The exemption is limited to the actual amount spent for the specified purpose. 

The following allowances qualify for this exemption: 

• Tour/Travel Allowance: Granted to cover travel costs or daily expenses incurred while touring for official duties.
• Transfer Allowance: Granted to meet the cost of travel and incidental expenses when an employee is transferred to a new location.
• Conveyance Allowance: Granted to meet expenditure on local transportation specifically for performing official duties.
• Daily Allowance: Granted to cover ordinary daily charges for living expenses due to an absence from an employee's normal place of work.
• Helper/Assistant Allowance: Granted to hire a helper or assistant where the assistant is required wholly and necessarily for the performance of official duties.
• Academic/Research Allowance: Granted to encourage academic, research, or other professional pursuits.
• Uniform Allowance: Granted to cover the purchase or maintenance of a uniform worn during the performance of official duties.

 

Section 10(14)(ii)

Under Section 10(14)(ii) of the Income Tax Act (read with Rule 2BB), employers can provide specific tax-exempt allowances to employees to help cover increased costs of living or special compensatory needs. [1]

Here is the comprehensive list of allowances exempt under this provision, subject to specific monetary limits: [1]

• Children's Education Allowance: Exempt up to ₹100 per month per child (maximum of two children).
• Hostel Allowance: Exempt up to ₹300 per month per child (maximum of two children).
• Transport Allowance for Disabled Employees: Exempt up to ₹3,200 per month for blind, deaf, dumb, or orthopedically handicapped employees to commute between home and work.
• Tribal/Scheduled Area Allowance: Exempt up to ₹200 per month in specified states (e.g., Madhya Pradesh, Tamil Nadu, Uttar Pradesh).
• Underground Allowance: Exempt up to ₹800 per month for uncongenial/unnatural climate working conditions in underground mines.
• Island Duty Allowance: Exempt up to ₹3,250 per month for armed forces serving in the Andaman & Nicobar or Lakshadweep groups.
• Border, Remote, or Difficult Area Allowances: Exempt amounts ranging from ₹200 to ₹1,300 per month, depending on the specific location designated by the government.
• High Altitude Allowance (Armed Forces): Exempt amounts range from ₹1,060 to ₹1,600 per month, depending on altitudes ranging between 9,000 feet and over 15,000 feet.
• Counter Insurgency Allowance: Exempt up to ₹3,900 per month for members of the armed forces.
• Special Compensatory Field/Modified Field Area Allowance: Exempt up to ₹2,600 per month for field areas and ₹1,000 per month for modified field areas.
• Highly Active Field Area Allowance (Armed Forces): Exempt up to ₹4,200 per month. [

Note: These specific limits are applicable primarily if you are opting for the Old Tax Regime. Under the New Tax Regime, most of these specific special allowances are not eligible for deduction.