Allowances which are Fully Taxable for Computation of Salary Income

Here’s a detailed breakdown of fully taxable allowances for the computation of salary income in India, based on the latest tax rules (FY 2024-25/AY 2025-26):

Fully Taxable Allowances

These allowances are entirely added to your taxable salary income and do not qualify for any exemptions:

1. Dearness Allowance (DA)

• Paid to offset inflation and cost-of-living adjustments.
• Fully taxable as part of salary income .

2. Entertainment Allowance

• Provided to cover hospitality expenses for clients.
• Fully taxable for private-sector employees.
• Exception: Government employees can claim a deduction under Section 16(ii) .

3. Overtime Allowance

• Compensation for working beyond regular hours.
• No exemptions apply .

4. City Compensatory Allowance (CCA)

• Paid to employees in high-cost urban areas.
• Fully taxable regardless of location .

5. Interim Allowance

• Temporary allowance granted before finalization of a permanent allowance.
• Taxable as salary income .

6. Project Allowance

• Given for project-related expenses.
• No exemptions under the Income Tax Act .

7. Tiffin/Meals Allowance

• Cash allowance for meals.
• Fully taxable (unless provided as a non-monetary perquisite like office canteen meals) 7.

8. Cash Allowances

• Includes marriage, bereavement, or holiday allowances.
• Always taxable .

9. Non-Practicing Allowance (NPA)

• Paid to doctors in government service who cannot practice privately.
• Taxable as salary .

10. Servant/Warden Allowance

• For hiring domestic help or for wardens in educational institutions.
• Fully taxable