Notified Special Allowance [Section 10(14)]

Exempted Incomes-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:

Allowances Exemption Limit
Children Education Allowance Up to Rs. 100 per month per child up to a maximum of 2 children is exempt
Hostel Expenditure Allowance Up to Rs. 300 per month per child up to a maximum of 2 children is exempt
Transport Allowance granted to an employee to meet expenditure on commuting between place of residence and place of duty Up to Rs. 1,600 per month (Rs. 3,200 per month for blind and handicapped employees) is exempt
Allowance granted to an employee working in any transport business to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided employee is not in receipt of daily allowance Amount of exemption shall be lower of following:
a)  70% of such allowance; or
b)  Rs. 10,000 per month
Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office Exempt to the extent of expenditure incurred for official purposes
Travelling Allowance to meet the cost of travel on tour or on transfer Exempt to the extent of expenditure incurred for official purposes
Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty Exempt to the extent of expenditure incurred for official purposes
Helper/Assistant Allowance Exempt to the extent of expenditure incurred for official purposes
Research Allowance granted for encouraging the academic research and other professional pursuits Exempt to the extent of expenditure incurred for official purposes
Uniform Allowance Exempt to the extent of expenditure incurred for official purposes
Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations) Amount exempt from tax varies from Rs. 300 to Rs. 7,000 per month.
Border area, Remote Locality or Disturbed Area or Difficult Area Allowance (Subject to certain conditions and locations) Amount exempt from tax varies from Rs. 200 to Rs. 1,300 per month.
Tribal area allowance in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Orissa Up to Rs. 200 per month
Compensatory Field Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance(Subject to certain conditions and locations) Up to Rs. 2,600 per month
Compensatory Modified Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance(Subject to certain conditions and locations) Up to Rs. 1,000 per month
Counter Insurgency Allowance granted to members of Armed Forces operating in areas away from their permanent locations. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations) Up to Rs. 3,900 per month
Underground Allowance to employees working in uncongenial, unnatural climate in underground mines Up to Rs. 800 per month
High Altitude Allowance granted to armed forces operating in high altitude areas (Subject to certain conditions and locations) a)  Up to Rs. 1,060 per month (for altitude of 9,000 to 15,000 feet)
b)  Up to Rs. 1,600 per month (for altitude above 15,000 feet)
Highly active field area allowance granted to members of armed forces (Subject to certain conditions and locations) Up to Rs. 4,200 per month
Island Duty Allowance granted to members of armed forces in Andaman and Nicobar and Lakshadweep group of Island (Subject to certain conditions and locations) Up to Rs. 3,250 per month
See also  Interest Incomes which are Exempt under Section 10(15)

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.
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