Notified Special Allowance [Section 10(14)]

Notified special allowance is an allowance that has been notified by the Central Government under Section 10(14) of the Income Tax Act, 1961. It is exempt from tax to the extent that it is actually incurred by the employee for the performance of their official duties.

The exemption for Notified Special Allowance under Section 10(14) is available to the extent of the actual expenses incurred, subject to the following limits:

• The exemption is available only to the extent that the allowance is specifically granted to meet expenses incurred wholly, necessarily, and exclusively in the performance of the duties of an office or employment of profit.
• The exemption is not available for any allowance that is in the nature of a perquisite.
• The exemption is available only to the extent of the actual expenses incurred, subject to any limits specified in the notification by the Central Government.

To claim the Notified Special Allowance exemption, the taxpayer must submit the following documents to the Income Tax Department:

• A certificate from the employer stating that the allowance is granted for a specific purpose and that it is actually incurred by the employee.
• Documentary proof of the expenses incurred, such as receipts, bills, and vouchers.

The Notified Special Allowance exemption is a valuable tax benefit for salaried individuals who incur certain specific expenses in the performance of their duties. It helps them to reduce their taxable income and save tax.

As per section 10(14), read with rule 2BB following allowances granted to an employee are exempt from tax subject to certain limit:

Conditions of Exemptions:

To be eligible for exemption, the following conditions must be met:

• The allowance must be notified by the Central Government under Section 10(14) of the Income Tax Act.
• The allowance must be actually incurred by the employee for the performance of their official duties.
• The allowance must be granted to an employee.

The employee must maintain documentary evidence to support their claim for exemption. This evidence may include bills, receipts, and vouchers.

Examples of Notified Special Allowances

Some examples of notified special allowances that are exempt from tax under Section 10(14) include:

• Daily allowance
• Conveyance allowance
• Medical allowance
• Children education allowance
• Tribal area allowance
• Compensatory field area allowance
• Compensatory modified field area allowance
• Special Allowance to Defense Personnel
• Special Allowance to Judges

It is important to note that the exemption under Section 10(14) is only available for notified special allowances. If an allowance is not notified by the Central Government, it will not be exempt from tax, even if it is actually incurred by the employee for the performance of their official duties.

Points to be Note :

Here are some additional points about the tax treatment of notified special allowances:

• The exemption under Section 10(14) is available only for allowances that have been notified by the Central Government.
• The allowance must be granted to meet expenses incurred in the performance of the employee’s duties.
• The employee must actually incur the expenses for which the allowance is granted.
• The amount of exemption that an employee can claim is limited to the actual expenses incurred.
• The exemption is available to both government and private sector employees.
• The exemption is available for allowances granted on a regular basis as well as for allowances granted on a one-time basis.
• The exemption is not available for allowances that are granted in lieu of salary or other perquisites.