Prescribed Allowances Exempt Under Section 10(14)

Salaries, Tax Ready Reckoner

Section 10(14) provides exemptions for certain special allowances granted to employees for specific purposes. These allowances are partially or fully exempt from tax, subject to prescribed limits and conditions.

Table of Contents

1. Fully Exempt Allowances (No Limit)

These allowances are 100% tax-free:

Compensatory Field Area Allowance(Armed Forces)
High Altitude Allowance(Defense personnel)
Island Duty Allowance(Armed Forces in Lakshadweep/Andaman)
UN Mission Allowance(For Indian peacekeepers abroad)

2. Partially Exempt Allowances (With Limits)

(A) Transport & Travel Related

ALLOWANCE	EXEMPTION LIMIT	CONDITIONS
Transport Allowance	₹1,600/month (₹3,200 for disabled)	For work-related commuting
Conveyance Allowance	Actual expense incurred	Must be for official duties
Daily Allowance	As per government rates	For tour/travel expenses

(B) Children Education

ALLOWANCE	EXEMPTION LIMIT	CONDITIONS
Children Education Allowance	₹100/month per child (max 2 children)	–
Hostel Expenditure Allowance	₹300/month per child (max 2 children)	–

(C) Special Duty Allowances

ALLOWANCE	EXEMPTION LIMIT	CONDITIONS
Border Area Allowance	₹1,300 – ₹4,200/month	For armed forces in specified areas
Tribal Area Allowance	₹200/month	For employees in scheduled tribal areas
Underground Allowance	₹800/month	For miners working underground

(D) Research & Academic

ALLOWANCE	EXEMPTION LIMIT	CONDITIONS
Research Allowance	Actual amount spent	For academic/research purposes
Helper Allowance	Actual expense	For employees needing assistant

3. Key Conditions for Exemption

Must be granted for specific purposes(not general salary supplement)
Actual expenditure proof requiredfor some allowances
Employer must specify in employment terms
Exemption only under Old Tax Regime(New Regime doesn’t allow)

4. How to Claim Exemption?

Submit proof of expensesto employer (for variable allowances)
Employer reports exempt portion in Form 16
No separate ITR disclosure neededif correctly reported in Form 16

5. Comparison Table: Taxable vs Exempt Portion

ALLOWANCE TYPE	EXEMPT AMOUNT	TAXABLE PORTION
Transport Allowance	₹1,600/month	Balance above limit
Children Education	₹100/child/month	Excess amount
Border Area Allowance	Full exemption	–