The allowances covered under section 10(14)(ii) of Income Tax Act, 1961 are meant to meet expenses that are not directly related to the performance of duties but are provided to employees due to the nature of their employment like cost of living in certain areas, climate, or other personal expenses necessitated by their job conditions. In this article, we will discuss the meaning of section 10(14)(ii) and type of allowance covered under this section.
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What is section 10(14)(ii) of Income Tax Act?
Section 10(14)(ii) of the Income Tax Act, 1961 deals with exemptions for certain allowances provided to employees by their employers during the employment. It specifically covers allowances granted to meet the personal expenses of employee or to compensate for increased living costs due to location of work.
What are the conditions to avail the Exemption u/s 10(14)(i)?
The tax exemption u/s 10(14)(ii) comes with specific conditions that are as follows:
- These allowance must be given by the employer to employee.
- These should be used for the specific purpose for which these are given.
- Any amount paid beyond this above exemption limits is taxable.
- The amount of exemption is subject to the limits prescribed by the CBDT.
Type of Allowances under Section 10(14)(ii)
The government periodically sets the exemption limits for various allowances u/s 10(14)(ii). Here are the exemption limits for allowances under this section:
1. Uncongenial Climate Allowance
Employees working in areas with very harsh or uncongenial climates receive this allowance to compensate for the adverse conditions of weather. Employees are eligible an exemption up to:
- ₹7000 per month for employees working at Siachen area of Jammu and Kashmir (category II).
- ₹800 per month for employees working at places specified in category I.
- ₹300 per month for employees working at any places located at a height of 1,000 meters or more above the sea level, other than places specified at categories I & II.
2. Snow Bound Area Allowance
This allowance is given to employees working in snow bound areas where facilities is limited and the conditions for living are difficult due to extreme cold and heavy snowfall. Employees are eligible an exemption up to:
- ₹7000 per month for employees working at Siachen area of Jammu and Kashmir (category II).
- ₹800 per month for employees working at places specified in category I.
- ₹300 per month for employees working at any places located at a height of 1,000 meters or more above the sea level, other than places specified at categories I & II.
3. Avalanche Allowance
This allowance is given to employees posted in areas prone to avalanches, this allowance compensates for the high risk and challenging conditions associated with such area. Employees are eligible an exemption up to:
- ₹7000 per month for employees working at Siachen area of Jammu and Kashmir (category II).
- ₹800 per month for employees working at places specified in category I.
- ₹300 per month for employees working at any places located at a height of 1,000 meters or more above the sea level, other than places specified at categories I & II.
4. Special Compensatory (Uncongenial Climate) Allowance
Employees working in areas with extremely harsh or uncongenial climates receive this allowance to compensate for the adverse conditions of weather. These conditions may include extreme heat, cold, humidity, or other environmental factors making living and working more difficult. Employees are eligible an exemption up to:
- ₹300 per month for employees working at any places located at a height of 1,000 meters or more above the sea level, other than places specified at category I and II.
5. Special Compensatory (Hilly Areas) Allowance or Climate Allowance
This allowance is provided to employees working in hilly areas where the climate is harsh and living conditions are difficult. The challenging terrain and weather conditions in such areas can lead to higher living costs and more difficult working environments. Employees are eligible an exemption up to:
- ₹7000 per month for employees working at Siachen area of Jammu and Kashmir (category II).
- ₹800 per month for employees working at places specified in category I.
- ₹300 per month for employees working at any places located at a height of 1,000 meters or more above the sea level, other than places specified at category I and II.
6. Special Compensatory (Difficult Area) Allowance or Disturbed Area Allowance
This allowance is given to employees working in areas classified as difficult or disturbed. These areas may face socio-political unrest, conflict, or other disturbances that impact daily life and safety. Employees are eligible an exemption up to:
- ₹1300 per month for employees working at place specified in category II
- ₹1100 per month for employees working at place specified in category III
- ₹1050 per month for employees working at place specified in category IV
- ₹750 per month for employees working at place specified in category V
- ₹300 per month for employees working at place specified in category VI
- ₹200 per month for employees working at place specified in category VII
7. Special Compensatory (Border Area) Allowance
This allowance is given to employees working in border areas where living and working conditions are particularly challenging due to the closeness to national borders. These areas require the heightened security risks, limited access to resources, and increased isolation. Employees are eligible an exemption up to:
- ₹1300 per month for employees working at place specified in category II
8. Special Compensatory (Remote Locality) Allowance or Scheduled/Tribal Area Allowance
Employees working in remote localities, scheduled areas, or tribal areas receive this allowance to compensate for the isolation and lack of infrastructure in these areas. These areas often have limited access to basic amenities, healthcare, and education which make living conditions more difficult. Employees are eligible an exemption of up to:
- ₹200 per month if they are working in Madhya Pradesh, Tamil Nadu, Uttar Pradesh, Karnataka, Tripura, Assam, West Bengal, Bihar or Orissa.
9. Underground Allowance
This allowance is given to employees working in uncongenial, unnatural climate in underground mines or similar environments. These conditions can be hazardous and challenging, requiring additional compensation. This Allowance is exempt for whole of India. Employees are eligible an exemption of up to:
- ₹800 per month for this allowance.
10. High Altitude Allowance
This allowance is given to employees working at high altitudes, these areas face the significant challenges posed by high altitude conditions like lower oxygen levels, extreme weather, and isolation. Employees are eligible an exemption up to:
- ₹1060 per month for employees working at place where altitude is of 9,000 to 15,000 feet.
- ₹1600 per month for employees working at place where altitude is above 15,000 feet.
11. Island Duty Allowance
This allowance is given to member of armed forces posted on islands where living conditions are challenging due to isolation and limited infrastructure. This allowance is exempt only for Andaman & Nicobar and Lakshadweep Group of Islands.
- This allowance is exempt up to ₹3,250 per month.
12. 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.
13. 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.
14 .Transport Allowance
A disabled employee is given a transport allowance of INR 3,200 per month to cover their travel expenses from home to their workplace.
15. Compensatory Field Area Allowance
The employee is eligible an exemption up to ₹2,600 per month for this allowance if the employee is working in specified areas of Arunachal Pradesh, Sikkim, Himachal Pradesh, Uttar Pradesh, and Jammu and Kashmir or entire states of Manipur and Nagaland.
16. Modified Field Area Allowance
The employee is eligible an exemption up to ₹1,000 per month for this allowance if the employee is working in designated areas in Punjab, Rajasthan, Haryana, Himachal Pradesh, Arunachal Pradesh, Assam, Sikkim, West Bengal, Uttar Pradesh, and Jammu and Kashmir and Entire states of Mizoram and Tripura
17. Counter-Insurgency Allowance
The employee is eligible an exemption up to ₹3,900 per month for this allowance if employee is members of the armed forces engaged in counter-insurgency operations.
Read also: Everything About Section 10(14)(i) of Income tax Act, 1961
Final Words
Section 10(14)(ii) of the Income Tax Act, 1961, provides tax exemptions for various allowances granted to employees to cover personal expenses related to their employment conditions like living in remote or high-altitude areas, or working in adverse climates. These allowances are exempt from tax to the extent specified by the CBDT which ensures that employees are not taxed for expenses necessitated by their job conditions.
Frequently Asked Questions (FAQ)
Highly active field area allowance is also covered under this section.
kindly tell us about the following allowances ..
1. medical outdoor
2. other allowance
3. self development allowance
4. washing allowance
5. quarter rent
6. electricity charges
these are shown is salary slip of DMRC (delhi metro) employee..whether any deduction can be claimed form salary
Thanks for Reading, dear!
Medical Outdoor Allowance: it is already covered under standard deduction hence no separate deduction allowed for the same.
Other Allowance: This is a broad term and its tax treatment depends on the specific purpose of the allowance.
Self Development Allowance: This allowance could be for attending job-related training or courses. If the training directly relates to enhancing your skills for your current role at DMRC, the allowance might be deductible with proper documentation. However, if it’s for personal development not directly linked to your job, it probably wouldn’t be deductible.
Quarter Rent: If you are occupying DMRC-provided accommodation, the rent deducted from your salary wouldn’t be a separate deduction for tax purposes.
Washing Allowance: Unfortunately, the Income Tax Act doesn’t offer any specific deduction for general laundry costs
Electricity Charges: Similar to the quarter rent, if these charges are for DMRC-provided accommodation, they wouldn’t be a separate deduction.
Hope it is helpful for you.
Food coupns are included in which section?
It will be considered as perquisites under section 17(2).
Hey people!!!!!
Good mood and good luck to everyone!!!!!
Hey people!!!!!
Good mood and good luck to everyone!!!!!
Hey people!!!!!
Good mood and good luck to everyone!!!!!