Everything About Section 10(14)(i) of Income tax Act, 1961

Section 10(14)(i) of the Income Tax Act, 1961, plays a important role in determining which allowances and perquisites provided by an employer are exempt from an employee’s taxable income. This section specifically address the allowances and perquisites given to employees to cover expenses incurred for performing their job duties. This section allows you to reduce your taxable income by the amount you spend on performing your job duties, as long as your employer provides a specific allowance for those expenses. In this article, we will explore the details of section 10(14)(i) of the Income Tax Act and its implications.

Everything About Section 10(14)(i) of Income tax Act, 1961

Table of Contents

What is section 10(14)(i) of Income Tax Act?

As per this section, allowances and perquisites are benefits offered by employer to employee as part of his compensation package, either in cash or kind which include Children’s Education Allowance, uniform allowances, conveyance allowances, and other similar perks. According to Section 10(14)(i) of the Income Tax Act, these benefits are exempt from income tax up to a specified limit and under certain conditions.

What are the conditions to avail the Exemption u/s 10(14)(i)?

The tax exemption u/s 10(14)(i) comes with specific conditions that are as follows:

  • The allowance or perquisite must be provided by the employer to the employee.
  • These should not be a personal allowance.
  • These must be intended to cover expenses that are necessarily incurred during the performance of job duties.
  • The employer must keep records of these allowances and perquisites and provide them to the Income Tax authorities when requested.
  • The employee is required to provide the details of these allowances to the employer in the prescribed format.

Maximum exemption under Section 10(14)(i)

The government periodically sets the exemption limits for various allowances and perquisites u/s 10(14)(i). Here are the exemption limits for allowances and perquisites under this section:

1. Children Education Allowance

This allowance is designed to assist employees with the costs of their children’s education. Employees can claim an exemption of up to ₹100 per month per child up to 2 children. This exemption is typically applicable for children up to the age of 20.

2. Uniform Allowance

This allowance is provided to employees to cover the costs of purchasing and maintaining job required uniforms. This allowance ensures employees can maintain the professional appearance required by their roles. The Income Tax Act doesn’t specify a single fixed limit for Uniform Allowance exemption. However, the exemption is the least of the following:

  • Actual expenditure incurred: Employees must save the bills and receipts for uniform purchases and maintenance to claim this exemption.
  • Amount provided by your employer: Employers may have a specific limit on the Uniform Allowance they offer.

3. Hostel Allowance

If you are a construction worker and have been assigned a project in a different city, and your employer provides a hostel facility because no other suitable accommodation is available nearby. In such case, the Hostel allowance would be considered job related allowance since staying in a hostel is a necessity for your job. You can get an exemption of up to ₹300 per month per child for hostel expenses, applicable for up to 2 children.

4. Hill Station Allowance

Employees working in hill stations may receive allowances to offset higher living costs. These allowances may be exempt from tax, but the specific conditions and limits for this exemption can vary.

5. Helper Allowance

If you are a marketing professional with a helper who assists with tasks like research, data entry, or presentations related to your job, this allowance could be job related. Under this section, the Helper Allowance is exempt up to the actual amount spent on engaging the helper for official duties. Any amount above the actual expense is taxable.

6. Academic Research Allowance

For researchers at a pharmaceutical company, this allowance covers costs like buying research materials, attending conferences, or subscribing to relevant journals. The allowance is exempt up to the actual expenditure incurred for research purposes.

7. Conveyance Allowance

This allowance compensates employees for travel expenses between their home and workplace. It is exempt up to the actual amount spent on these travel expenses. Any excess amount received beyond the actual expenditure is taxable.

8. Travel Allowance for official travel

If your employer provides an allowance to cover travel expenses for work related trips like train or bus fares, this can be exempt under this section. The exemption applies up to the actual amount spent on official travel. Allowances for travel on tour or transfer are also exempt.

9. Daily Allowance

This allowance covers daily expenses like meals and local transportation during official tours or transfers. As long as it is for official travel and not personal expenses, it can be exempt. The exemption applies up to the actual expenditure incurred for official purposes. Any excess amount is taxable.

10. Special Allowance

Any special allowance given to an employee to cover expenses incurred during performing their job duties is exempt up to the actual expenditure amount.

Key points to be remember

  • The exemption under Section 10(14)(i) applies only to the actual expenses incurred by the employee. Any amount received beyond these expenses is taxable.
  • Any allowance not exempt under this section will be fully taxable according to the applicable tax rates.
  • Employers must deduct tax at source from the employee’s salary including both exempted allowances and perquisites.

Remember that the specific allowances covered under Section 10(14)(i) and their exemption limits may change with updates to the Income Tax Act or departmental clarifications. It is advisable to consult a tax advisor for the most current information.

Read also: How To Maximize Tax Benefits For Senior Citizens in India in 2024

Final Words

Section 10(14)(i) of the Income Tax Act allows for certain allowances and perquisites to be excluded from an individual’s taxable income. This section provides relief to employees by exempting specific expenses they incur while performing their job duties. To avoid any tax issues, it is important for both employers and employees to adhere to the provisions of this section. Employees must provide the necessary details of their allowances and perquisites to their employers in the prescribed format to benefit from the exemption under this section.

Frequently Asked Questions (FAQ)

Leave Travel allowance supports employees’ travel expenses during their leave and is exempt under Section 10(5) of the Income Tax Act.

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