Child Education Comes Under Which Section?
Section 80C Section 80C of the Income Tax Act has provisions for tax deductions on tuition/education fees paid by a parent towards educating his/her children. Taxpayers can avail deductions to a tune of Rs 1.5 lakh under Section 80C (as per 2020-21 tax slabs), with other investments also eligible for this rebate.
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Contents
- 1 Can I claim tuition fees on my taxes?
- 2 How do I claim child education allowance in ITR?
- 3 Is children education part of 80C?
- 4 Is school tuition fees under 80C?
- 5 What is child education allowance?
- 6 What is 80C and 80CCD?
- 7 Can I claim 80D for parents?
- 8 What is Section 10A A?
- 9 What is Section 10 13A and Rule 2A?
- 10 What is Section 10 14 II Rule 2BB 2?
What is Section 10 14 II?
Tax, tax rates, income tax advice, tax advice, tax planning, news, advice, income tax act, finance act, tax deductions, ELSS, ULIP, PPF, life insurance, infrastructure bonds, mediclaim What are allowances and which allowances are exempt? Allowance is defined as a fixed quantity of money or other substance given regularly in addition to salary for meeting specific requirements of the employees.
- (iii) 40% of Salary (50% in case of Mumbai, Chennai, Kolkata, Delhi) Salary here means Basic + Dearness Allowance, if dearness allowance is provided by the terms of employment.
- Leave Travel Allowance: The amount actually incurred on performance of travel on leave to any
place in India by the shortest route to that place is exempt. This is subject to a maximum of the air economy fare or AC 1st Class fare (if journey is performed by mode other than air) by such route, provided that the exemption shall be available only in respect of two journeys performed in a block of 4 calendar years.
- Certain allowances given by the employer to the employee are exempt u/s 10(14). All these exempt allowance are detailed in Rule 2BB of Income-tax Rules and are briefly given below:
- For the purpose of Section 10(14)(i), following allowances are exempt, subject to actual expenses incurred:
- (i) Allowance granted to meet cost of travel on tour or on transfer.
- (ii) Allowance granted on tour or journey in connection with transfer to meet the daily charges incurred by the employee.
- (iii) Allowance granted to meet conveyance expenses incurred in performance of duty, provided no free conveyance is provided.
- (iv) Allowance granted to meet expenses incurred on a helper engaged for performance of official duty.
- (v) Academic, research or training allowance granted in educational or research institutions.
- (vi) Allowance granted to meet expenditure on purchase/ maintenance of uniform for performance of official duty.
- Under Section 10(14)(ii), the following allowances have been prescribed as exempt.
| Type of Allowance | Amount exempt |
| (i) Special Compensatory Allowance for hilly areas or high altitude allowance or climate allowance. | Rs.800 common for various areas of North East, Hilly areas of UP, HP. & J&K and Rs.7000 per month for Siachen area of J&K and Rs.300 common for all places at a height of 1000 mts or more other than the above places. |
| (ii) Border area allowance or remote area allowance or a difficult area allowance or disturbed area allowance. | Various amounts ranging from Rs.200 per month to Rs.1300 per month are exempt for various areas specified in Rule 2BB. |
| (iii) Tribal area/Schedule area/Agency area allowance available in MP, Assam, UP., Karnataka, West Bengal, Bihar, Orissa, Tamilnadu, Tripura | Rs.200 per month. |
| (iv) Any allowance granted to an employee working in any transport system to meet his personal expenditure during duty performed in the course of running of such transport from one place to another place. | 70% of such allowance upto a maximum of Rs.6000 per month. |
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- (xv) Special allowance
- granted to members of
- armed forces in the
- nature of island duty
- allowance.
- (in Andaman & Nicobar
- & Lakshadweep Group
- of Islands )
Source: Income Tax Department : Tax, tax rates, income tax advice, tax advice, tax planning, news, advice, income tax act, finance act, tax deductions, ELSS, ULIP, PPF, life insurance, infrastructure bonds, mediclaim
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Can I claim tuition fees on my taxes?
Deduction of payment made towards Tuition Fees under section 80C – A parent can claim a deduction on the amount paid as tuition fees to a university, college, school or any other educational institution. Other components of fees like development fees and transport fees are not eligible for deduction under Section 80C.
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What comes under Section 80C?
Subsections of Section 80C – Under the Income Tax Act of India, deductions under Section 80C are divided into certain sub-sections. These are –
| Tax saving sections | Eligible investments for tax exemptions |
| Section 80C | Investments in Provident Funds such as EPF, PPF, etc., payment made towards life insurance premiums, Equity Linked Saving Schemes, payment made towards the principal sum of a home loan, SSY, NSC, SCSS, etc. |
| Section 80CCC | Payment made towards pension plans, as well as mutual funds, |
| Section 80CCD(1) | Payment made towards certain Government-backed schemes such as National Pension System, Atal Pension Yojana, etc. |
| Section 80CCD(1B) | Investments of up to Rs.50,000 in NPS are considered for exemption under this section. |
| Section 80CCD(2) | Employer’s contribution towards NPS (up to 10%, comprising basic salary and dearness allowance, if any) is exempted under this category. |
How do I claim child education allowance in ITR?
A Complete Guide on Children Education Allowance Exemption Your primary concern as a parent, after the health of your children, is their education. Getting quality education for your child is what keeps you motivated to work harder each day. Since schooling and subsequent higher studies are becoming expensive with each passing year, merely saving money in a Savings Account may not meet the educational expenses you are bound to incur.
- Besides, the taxman’s axe on your income could further eat into your savings.
- What you need is a smart investment plan in this situation.
- This could enable you to fulfil the academic ambitions of your children while also saving taxes at the same time.
- Here are some tips to help you achieve both goals.
- Save taxes on tuition fees You can claim a deduction of up to Rs 1.5 Lakh under Section 80C of the Income Tax Act on your child’s school or college fees, and reduce your taxable income.
You can claim this deduction on the tuition fee of two children on an annual basis. Invest in Sukanya Samriddhi Yojna for your young daughter If you have a daughter who is below ten years of age, you can consider investing in the, This is an investment scheme floated by the Government of India for the girl child.
This investment plan keeps your money locked in until your daughter turns 18 years of age. You can begin with a small deposit of Rs 1,000 which is the minimum amount and set aside up to Rs 1.5 lakh annually in this scheme. Besides helping you plan out your daughter’s further studies, investing in this plan will also fetch you a tax benefit up to the extent of Rs 1.5 lakh in a given year under Section 80C of the Income Tax Act.
You can open a for your daughter with HDFC Bank and reap these benefits. Looking to apply for a Sukanya Samriddhi Account? your nearest branch to open your account. Invest in an ELSS dedicated to your child’s education An ELSS or an Equity Linked Savings Scheme is the only category that provides tax benefits under Section 80C of the Income Tax Act.
You can get tax benefits of up to Rs 1.5 lakh annually by investing in this scheme. An ELSS is an efficient tax savings tool compared to other investment options. This is because it comes with a shorter lock-in period of three years, as compared to others that have a minimum lock-in of five years. The most significant advantage of ELSS is that it offers the benefit of capital appreciation over the long term.
You can consider investing in an with the long-term aim of funding your child’s education. Through a systematic investment plan, you meet your financial goals easily without a strain on your budget. Regular investment in an ELSS also provides tax benefits on your annual income, as mentioned earlier.
- Have an investment strategy in place Worrying about your child’s education is natural, but with a proper investment plan in place, you can be assured their knowledge will not be compromised on.
- Many online calculators available can help you calculate the amount you need for future educational purposes.
You can use these tools to arrive at an investment strategy that can help you invest adequately and save taxes efficiently. If you need additional assistance on charting out a well-defined investment plan, you could opt for professional financial advice.
- This can help you invest and save towards the educational pursuits of your children.
- The information provided in this article is generic in nature and for informational purposes only.
- It is not a substitute for specific advice in your own circumstances.
- You are recommended to obtain specific professional advice from before you take any/refrain from any action.
Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities. : A Complete Guide on Children Education Allowance Exemption
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What is Section 10 13 A?
Computation of House Rent Allowance (HRA) HOUSE RENT ALLOWANCE 1. HRA is given by employer to employee to meet the expenses in connection of a rented house taken by the employee for his stay. The Income Tax Act allows for deduction in respect of the HRA paid to employees.2.
3. HRA is exempt ) to the extent of minimum of the following three amounts:-1) Actual house rent allowance received from your employer2) Actual house rent paid by you minus 10% of your basic salary3) 50% of your basic salary if house is situated in metro cities (Mumbai, Calcutta, Delhi, Chennai) or 40% of your basic salary for any other place Meaning of Salary for calculation the exemption of HRA
Salary means (Basic + D.A + Commission based on fixed percentage on turnover). Salary is to be taken on due basis in respect of the period during which the period accommodation is occupied by the employee in the previous year. Where the employee has not actually incurred any expenditure on payment of rent, then no exemption of HRA is available.
NOTE:-
Allotted HRA cannot exceed more than 50% of your basic salary. Tax benefits of HRA along with a home loan can also be availed. In case you stay with your parents, you are eligible to pay rent to your parents and collect a receipt for HRA claim. However, similar rules don’t allow you to pay rent to your spouse and claim a tax exemption. If the annual rent of your accommodation exceeds ₹ 1,00,000, then presenting the landlord’s PAN card/self declaration (in case he does not have a PAN card) is mandatory. In case your landlord is an NRI, you must deduct 30% tax from the rent amount that needs to be declared.
Is children education part of 80C?
Section 80C of the Income Tax Act has provisions for tax deductions on tuition/education fees paid by a parent towards educating his/her children. Taxpayers can avail deductions to a tune of Rs 1.5 lakh under Section 80C (as per 2020-21 tax slabs), with other investments also eligible for this rebate.
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Is school tuition fees under 80C?
When you pay your kids’ tuition fees, it qualifies for income deduction and also helps in reducing your tax liability. Here is how you can claim this tax benefit under section 80C of the Income-tax Act, 1961 under the old tax regime. – 
ThinkStock Photos If both parents are working and pay taxes, both can claim individually up to the amount of fees paid. Sending kids to school has an inbuilt tax advantage for parents. This is because tuition fee qualifies for tax benefit under Section 80C of the Income-tax Act, 1961.
- The amount of tax benefit is within the overall limit of the section of Rs 1.5 lakh a year.
- For tax purposes, the fee reduces the total gross income which in turn reduces the tax liability.
- Let us say you fall in the highest income bracket and you pay 31.2 per cent as tax, and you pay Rs 80,000 a year as schools fees.
Here, the tax saved will amount to Rs 24,960 in that year. Do note that effective from FY 2020-21, an individual can continue with the old/existing tax regime (with tax deductions and exemptions). He/she has an option to opt for the new tax regime sans tax deductions and exemptions which includes sections 80C, 80D, 24 etc.
- Therefore, if an individual opts for the new tax regime in current FY 2021-22, then he/he will not be able to claim the commonly availed deductions and exemptions such as deduction on tution fees under section 80C.
- Here’s how to get the maximum benefit out of tuition fees,
- Are all institutions eligible? Tuition fees paid at the time of admission or anytime during the financial year to any registered university, college, school or educational institution based in India qualifies for tax benefit.
What kind of education? It has to be a full-time education, including any play school activities, pre-nursery and nursery classes. The institution can be either private or a government sponsored one. What is not covered? At times, parents have to make payments, other than tuition fees, to the educational institutions.
Payments like development fees or donation or capitation fees, etc., are not covered and do not qualify for tax benefit. Also, if you haven’t paid the fees on time, the applicable late fee paid will not be eligible. Tax benefit for how many children? The benefit applies for the fees paid for up to two children.
So if a couple has four children, both can claim tax benefit as both have a separate limit of two children each. Which parent gets the tax benefit? The parent who makes the payment gets the tax advantage. If both parents are working and pay taxes, both can claim individually up to the amount of fees paid.
- If both are working and want to take the benefit under Section 80C for the amount paid by them respectively, they can do so.
- So if the fee paid is Rs 2 lakh, of which the father has paid Rs 50,000, while the mother has paid Rs 1.5 lakh, both can claim the amount individually as per the payment made by them.
Conclusion As the upper limit for Section 80C tax benefit is Rs 1.5 lakh a year, see how much of that gets exhausted through tuition fees and then decide on further tax savers. While the tax benefit on tuition fees is incidental and helps you to save tax during the early days of your child’s education, do not forget to create a long-term investment plan for his higher education.
Estimate the amount needed for higher studies and create a savings plan towards that goal, preferably through SIPs in 3-5 equity diversified mutual funds scheme. To ensure that the goal is met, do buy adequate life cover, preferably through a pure term insurance plan. ( Originally published on Feb 17, 2017 ) (Your legal guide on estate planning, inheritance, will and more.) Download The Economic Times News App to get Daily Market Updates & Live Business News.
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What is child education allowance?
The Children Education Allowance (CEA) is paid to the government employees in India for the schooling and hostel facilities offered to their children. The amount provided under CEA for a differently abled child is double that offered to a normal child.
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What is the limit for 80E?
A maximum deduction of up to Rs.40,000 can be availed under Section 80E. While availing deduction under section 80E, the taxpayer must obtain a certificate from the bank from which the loan was availed providing details of principal and interest portion of the education loan paid during the financial year.
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Is 80D and 80C same?
Difference between Section 80D and Section 80C – A lot of people remain confused between Section 80D and Section 80C. Here are the basic differences between Section 80C and Section 80D deductions:
| Categories | Section 80C | Section 80D |
| Meaning | Section 80C offers tax deductions on different types of tax-saving investments, such as ULIP, PPF, ELSS, EPF, LIC premium, etc. | Section 80D deduction is allowed for availing tax exemptions on health insurance premiums paid for self, family, & parents and expenses incurred on preventive health check-ups. |
| Maximum Tax Deduction Limit | Up to Rs 1.5 lakh | Up to Rs 1 lakh |
| Scope of Tax Benefits | Higher tax benefits | Lower tax benefits |
What is 80C and 80CCD?
What is the difference between 80CCC and Section 80CCD? – Section 80CCC deals with deductions that can be availed for contributions made towards annuity plans, pension plans eligible under Section 10(23AAB). Section 80CCD only pertains to deductions for the two plans offered by the Government of India, namely the National Pension Scheme (NPS) and Atal Pension Yojana (APY).
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What is Section 80D and 80DD?
Section 80D of the Income Tax Act provides tax deductions for medical expenditure made for the self and the family which can go up to Rs.50,000. Self, spouse, children, parents, and Hindu Undivided Families (HUF) can claim this.
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Can I claim 80D for parents?
Who can claim an 80D deduction? – Every individual (including non-resident individuals) and HUF can claim a deduction under Section 80D. However, the higher limit of deduction available to senior citizens is not available in case of non-resident senior citizens.
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Can we claim 80D and 80DD together?
Living through the pandemic has taught us the importance of having the right amount of insurance. It is a known fact that buying health insurance for your family, dependent children and parents can help you save tax under section 80D of the Income-tax Act, 1961.
- You can save tax up to a maximum of Rs 1 lakh per financial year if you, your family members and your parents both are above the age of 60 years by paying health insurance premium.
- However, if you can’t afford to pay for health insurance premium or unable to buy one due to pre-existing conditions, then also you can save tax via medical expenditures.
Before you read any further, there is one thing you need to know. From FY 2020-21, an individual can continue with the old/existing tax regime by availing of existing deductions and tax exemptions. He/she also has the option to opt for the new, concessional tax regime without claiming any deductions and tax exemptions.
The tax benefits one forgoes by opting for the new tax regime include deductions under: section 80C for a maximum of Rs 1.5 lakh claimed by investing in specified financial products, section 80D for health insurance premium paid, 80TTA for deduction on savings account interest earned from a bank or post office, benefit under 80DDB etc.
(New vs existing tax regime: All you need to know) Therefore, if you opt for the new tax regime infor the current FY 2021-22, then you will not be able claim the below-mentioned deductions. Here’s what you need to know about saving taxes via medical expenses under the old tax regime.
Under Section 80D
Section 80D of the Income-tax Act allows you to save tax by claiming medical expenditures incurred as a deduction from income before levy of tax. You can claim this deduction if these two conditions are satisfied: a) The medical expenditure must be incurred either on self, spouse or dependent children or/and parents.
- Also, the person for whom the medical expenditure is incurred must be 60 years and above.
- Therefore, in most cases people would be able to claim this only for self/spouse and/or parents as dependent children are less likely to be in the 60+ age bracket.
- B) The person on whom medical expenditure has been incurred should not be covered under any health insurance policy.
If these two conditions are satisfied, then one can claim a maximum deduction of Rs 50,000 in a financial year for the expenditure incurred. To claim this deduction, all the medical expenditure must be paid in any other mode other than cash. This means that all payments for medical expenses must be done via banking channels such as credit card, debit card, and Net-baking or digital channels such as mobile wallets, UPI and so on.
- Also Read: Use medical bills of parents over 60 to save tax However, one should not get confused between the terms expenditure on preventive health check-up and medical expenditure.
- Expenditure on preventive health check-up can be done via cash and maximum deduction that can be claimed is Rs 5,000 irrespective of the person’s age.
On the other hand, medical expenditure must be done either on self/family members (as defined under law) and/or parents who are aged 60 years and above for the treatment of diseases or ailments. Also Read: How diagonstic centre can help you save tax All about deduction for medical expenditure
| Family members/parents below 60 years | Family members/parents above 60 years | |
| Section 80D | Not allowed | Rs 50,000 |
| Section 80DDB | Rs 40,000 | Rs 1 lakh |
| Section 80DD/80U* | Rs 75,000 or Rs 1.25 lakh (depending on disability percentage) | Rs 75,000 or Rs 1.25 lakh (depending on disability percentage) |
Deduction under section 80DD and 80U does not take age into consideration
Under section 80DDB
Deduction under section 80DDB can be claimed only for the expenditure done for treatment of illness specified under this section of the Income-tax Act. The amount of deduction that can be claimed depends on the age of the person on whom the expenditure has been incurred.
- The deduction can be claimed for self or a dependant.
- However, if it is being claimed for a dependant, then the person should be completely dependent on the individual claiming the deduction.
- If the person on whom expenditure has been incurred, is below the age of 60 years then a maximum deduction of Rs 40,000 can be claimed.
On the other hand, if the age of the person is 60 years and above, then in that case the maximum deduction that can be claimed is Rs 1 lakh. This deduction can be claimed irrespective of whether the person is covered under any health insurance policy or not.
Section 80DD and section 80U
Sections 80DD and 80U deals with the tax-saving deduction that can be claimed for the medical expenditure incurred for disabled persons. Under these sections, deduction can be claimed by a person for himself/herself or for a dependent person who is differently abled.
The law defines dependent person as spouse, children, parents, brothers and the sisters of the individual. For both sections, the amount that can be claimed as deduction does not depend on the age of the person. It depends on the percentage of disability of the person. If the disability is more than 40 per cent but less than 80 per cent, then in that case a deduction of Rs 75,000 will be allowed.
On the other hand, the deduction of Rs 1.25 lakh will be allowed if the percentage of disability is 80 per cent or more. This deduction is fixed irrespective of the actual expenses. However, remember both these deductions cannot be claimed simultaneously.
- Section 80DD: The deduction can be claimed for the expenditure incurred on the medical treatment (including nursing), training and rehabilitation of a person with disability.
- The deduction is claimed from total income of the claimant before levy of tax thereby reducing the total tax payable.
- The deduction can also be claimed if the individual has paid for/deposited money under any scheme of the Life Insurance Corporation (LIC) or any other insurer or the administrator or the specified company for the maintenance of the disabled dependant.
The scheme in which the money has been deposited should provide annuity payment or lump sum amount for the benefit of the dependent suffering from disability, in the event of death of the individual. The individual can also nominate the dependent person suffering with disability or any other person or a trust to receive payment on his behalf.
- Budget 2022 has proposed to introduce a new tax benefit for the parent/guardian of a disabled person.
- As per the proposal, if a parent/guardian of a disabled person buys a savings life insurance policy with the latter as beneficiary then the parent/guardian would be eligible to claim deduction from gross total income.
This tax benefit can be claimed even in cases where the buyer of the policy, i.e., parent/guardian, is still alive. Also Read: Budget introduces new tax benefit for parents of disabled Section 80U: On the other hand, Section 80U provides deduction if the individual himself/herself is suffering from the disability.
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How do I claim child education allowance?
To claim CEA reimbursement, the government employee must present a certificate issued by the Head of the Institution for the period/year for which the claim is being made. The certificate should attest to the child’s attendance in school throughout the previous academic year.
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What is Section 10A A?
D. CASE LAWS RELEVANT FOR Section 10A, Section 10AA & Section 10B – 1. Condition that return should be filed within due date is mandatory. M/s. Saffire Garments vs. ITO (ITAT Special Bench) (Rajkot) 04.12.2012 S.10A: Condition that ROI should be filed within due date is mandatory.
For AY 2006-07, the assessee filed a ROI on 31.1.2007 when the due date was 31.12.2006. The assessee claimed s.10A deduction. The AO &CIT(A) rejected the claim by relying on the Proviso to s.10A(1A). The Special Bench had to consider whether the Proviso to s.10A(1A) was mandatory or directory and whether s.10A deduction could be allowed even to a belated return.
HELD by the Special Bench: The Proviso to s.10A(1A) provides that “no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under Section 139(1)”. The assessee’s argument that the said Proviso is merely directory and not mandatory is not acceptable.
- The Proviso is one of the several consequences (such as interest under Section 234A) that befall an assessee if he fails to file a ROI on the due date.
- As the other consequences for not filing the ROI on the due date are mandatory the consequence in the Proviso cannot be held to be directory ( Shivanand Electronics 209 ITR 63 (Bom) & other judgements distinguished).2.
Specific conditions of sections under which claim is made has to be followed. Commissioner of Income tax VS. Regency Creations Ltd.27 taxmann.com 322 (DELHI)Assessment years 2003-04, 2004-05, 2006-07 and 2007-08 – Whether though considerations which apply for granting approval under Sections 10-A and 10-B may to an extent, overlap, yet deliberate segregation of these two benefits by statute reflects Parliamentary intention, that to qualify for benefit under either, specific procedure enacted for that purpose has to be followed – Held, yes – Whether, therefore, approval granted to a 100 per cent EOU set up under Software Technology Park Scheme cannot be deemed to be an approval under section 10-B – Held, yes Circulars and Notifications : Circular Nos.1 of 2005, dated 6-1-2005, 149/194/2004/TPL, dated 6-1-2005, 200/20/2006, dated 31-3-2006 and 694, dated 23-11-1994; Instruction No.1 of 2006, dated 6-1-2005 3.
Reopening under Section 147 justifiable even after 4 years under certain conditions. Siemens Information Systems Ltd. VS. Assistant Commissioner of Income-tax 20 taxmann.com 666 (BOM.) / 207 TAXMAN 132 (BOM.) (MAG.) / 343 ITR 188 (BOM.) Assessment year 2004-05 – Assessee-company claimed deduction under section 10A which was allowed by Assessing Officer without specifically dealing with eligibility of assessee to said claim – During course of assessment proceedings for subsequent assessment year 2006-07, materials on record revealed that units of assessee were not independent units; no independent accounts were maintained and there was an overlapping of work and use of resources amongst units and several non section 10A activities were being carried on in section 10A units – On basis of such disclosure Assessing Officer sought to reopen assessment – Whether even if reopening of assessment had taken place beyond a period of four years of end of relevant assessment year reopening assessment under section 147 was justified – Held, yes 4.
Deduction is to be allowed only after allowing depreciation. Siemens Information Systems Ltd. VS. Deputy Commissioner of Income-tax, Circle 7(2) 19 taxmann.com 6 (MUM.) / 135 ITD 196 (MUM.) / 146 TTJ 303 (MUM.) Assessment year 2006-07 – Whether deduction under section 10A/10B has to be allowed only after deducting depreciation from profits of eligible business even though such a claim for depreciation has not been raised by assessee – Held, yes 5.
- Phoenix Lamps Ltd. VS. Additional Commissioner of Income-tax, Range, Noida 29 SOT 378 (DELHI) / 126 TTJ 945 (DELHI) – Assessment year 2003-04 – Whether in view of Circular No.7/2003, dated 5-9-2003 where unabsorbed depreciation for assessment years 1993-94 to 1995-96 pertained to period ended before 1-4- 2001, same could not be set off against income of assessment year 2003-04 – Held, yes. CBDT’s Circular No.7 of 2003, dated 5-9-2003
- Commissioner of Income-tax, Cochin VS. Patspin India Ltd.15 taxmann.com 122 (KER.) / 203 TAXMAN 47 (KER.) / 245 CTR 97 (KER.)- Assessment years 200 1-02 to 2005-06 – Whether deduction under Section 10B on export profit of EOU has to be computed after setting off carried forward unabsorbed depreciation as provided under Section 32(2) – Held, yes
- Commissioner of Income-tax, Karnataka I, Bangalore VS. HimatasingikeSeide Ltd.156 TAXMAN 151 (KAR.) / 206 CTR 106 (KAR.) / 286 ITR 255 (KAR.) Assessment year 1994-95 – Assessee was 100 per cent export oriented industrial unit in terms of Section 10B – Assessee filed nil return claiming exemption under Section 10B and it also adjusted brought forward unabsorbed depreciation against income from other sources – Assessing Officer, accepting assessee’s claim, assessed total income at nil – Commissioner, in exercise of powers under Section 263, set aside assessment order holding that exemption under Section 10B was allowed on an inflated amount without deducting unabsorbed depreciation from export income – Whether since Section 10B provides 100 per cent exemption for export income and not for other income, assessee could not have adjusted unabsorbed depreciation against other income so as to take exemption from payment of tax even for other income – Held, yes – Whether, therefore, order of Commissioner was to be sustained – Held, yes
- Assistant Commissioner of Income-tax VS. Jewellery Solutions International (P.) Ltd.28 SOT 405 (MUM.) – Assessment year 2003-04 – Whether deduction under Section 10B is to be allowed from total income of assessee after adjusting unabsorbed depreciation – Held, yes
6. Carry forward of losses Sword Global (I) (P.) Ltd. VS. Income-tax Officer, Co. Ward-II(1), Chennai 122 ITD 103 (CHENNAI) / 119 TTJ 427 (CHENNAI) – Assessment year 2003-04- Whether carry forward losses of earlier assessment years have to be set off first against total income of relevant assessment year and, it is out of balance income only that deduction under Section 10B can be granted – Held, yes 7.
Conversion of existing unit • Infrasoft Technologies Ltd. Vs. Deputy Commissioner of Income-tax, Circle 11(1 )(, New Delhi 19 taxman.com 86 (DELHI)/ 135 ITD 19 (DELHI)/ 114 TTJ 622 (DELHI) – Assessment Year 2002-03 – Assessee-company set up its industrial undertaking in assessment year 1996-97 in domestic tariff area – Assessee-company received approval of STPI on 28/3/2000 – Thereupon, assessee claimed deduction under Section 10A which was rejected on two grounds (i) there was conversion of undertaking established in assessment year 1996-97 into STPI unit and (ii) ownership/beneficial interest had been transferred in year under consideration in terms of Section 10A(9) read with Explanation 1 – On instant appeal, it was noted that there was neither any whisper of a word in STP registration application suggesting that assessee had intended to set up a new unit nor such intention could be gathered from conduct of assessee while seeking STP from competent authority – Rather, assessee had categorically mentioned in application for conversion of existing unit – It was also apparent that assessee had included infrastructure, staff and skilled labour etc.
of existing unit in STP registration application form – Whether on facts, finding of Commissioner (Appeals) that it was a case of conversion of an existing software export unit to STP unit which would connote conversion of a unit already set up, was to be upheld – Held, yes – Whether, moreover, since it was apparent that share holding of five persons as on 31/3/2002 had declined to 37.66 per cent from 100 per cent in the previous year when undertaking was set up, assessee’s case was squarely covered by provisions of section 10A(9) – Held, yes – Whether in view of aforesaid, revenue authorities were justified in rejecting assessee’s claim – Held, yes.
Chenab Information Technologies (P.) Ltd. VS. Income-tax Officer, Ward 8(1)2 25 SOT 432 (MUM.) – Assessment year 2001-02 – Assessee had established a software unit at SEEPZ which was not eligible for exemption under Section 10A – In order to take benefit of new policy of Government to exempt income from Software Technology Park Unit (STP Unit), assessee set up a new unit which was approved as STP unit – However, assessee’s claim for exemption under Section 10A for certain amount being income of new unit was rejected by Assessing Officer holding that software development activity in new unit had been carried out mainly by employees of existing unit and, thus, it was a mere case of splitting/reconstruction of existing business – On appeal, Commissioner (Appeals) upheld order of Assessing Officer – Whether since existing business of assessee was development of software and in new unit also, assessee had done same business using same employees, it could not be a case of different business requiring different specialization, being taken up for which setting up of a new unit could be said to have become a business necessity – Held, yes – Whether, moreover, merely because customers in new unit were different, it could not be a basis to hold that new unit was separate and independent – Held, yes – Whether, therefore, authorities below rightly concluded that new unit had been set up by splitting up of business of old unit and was, thus, not eligible for deduction under Section 10A – Held, yes • Income-tax Officer Ward-(1), Range-1, Trivandrum VS.
Stabilix Solutions (P.) Ltd.8 taxmann.com 45 (COCH) – Assessment year 2004- 05 – Assessee-company set up a 100 per cent export oriented undertaking by taking on sub-lease 4000 sq.ft. built up area from STPL which held leasehold rights in total area of 6000 sq.ft.
– STPL also leased out plant and machinery to assessee-company in excess of statutory limit of 20 per cent – Both companies manufactured same product i.e., computer software and sold same to a particular company abroad – Even employees of both companies, who represented human capital were headed by same functional head – Whether, on facts, it could be concluded that assessee’s undertaking stood formed almost wholly by transfer of resources, including plant and machinery, from STPL, and, therefore, it was not entitled to deduction under Section 10B as it failed to fulfill conditions stipulated under section 10B(2) – Held, yes 8.
Sale proceeds must be brought in India in foreign exchange.
- Commissioner of Income-tax, Cochin VS. Electronic Controls & Discharge Systems (P.) Ltd.13 taxmann.com 193 (KER.) / 202 TAXMAN 33 (KER.) / 245 CTR 465 (KER.) Assessment years 2003-04 and 2004-05 – Whether Section 1 0A provides for exemption only on profits derived on export proceeds received in convertible foreign exchange – Held, yes – Whether, therefore, benefit of exemption under section 1 0A cannot be extended to local sales made by units in Special Economic Zone, whether as part of domestic tariff area sales or as inter-unit sales within zone or units in other zones – Held, yes
- Swayam Consultancy (P.) Ltd. VS. Income-tax Officer 20 taxmann.com 803 (AP.) / 336 ITR 189 (AP)- Assessment year 2007-08 – Delivery of goods to a foreign buyer in India does not amount to export.
- Assistant Commissioner of Income-tax, Range 1, Hyderabad VS. Bodhtree Consulting Ltd.41 SOT 230 (HYD.) / 134 TTJ 214 (HYD.) – Assessment year 2004-05 – Whether in order to avail deduction under section 1 0B sale proceeds must be receivable in convertible foreign exchange – Held, yes – Whether sale proceed received in convertible foreign exchange means ‘actual receipt’ and not deemed receipt – Held, yes – Whether if that object is kept in mind, amount received by an assessee in form of investment in equity shares in foreign exchange cannot be considered to be received in form of convertible foreign exchange – Held, yes – Whether merely because an assessee takes permission from RBI to receive foreign exchange in form of equity investment it does not lead to conclusion that assessee has received export proceeds in foreign exchange, as RBI has no role to play to suggest whether any investment/income for capitalization of expenditure is genuine or otherwise in terms of section 10B – Held, yes – Whether, therefore, an assessee would not be eligible for benefit of section 10B on such investments – Held, yes
9. Transactions must be at Arm’s Length pricing and the basis of calculation of export turnover and total turnover should be same. ADP (P.) Ltd. VS. Deputy Commissioner of Income-tax, Circle 1(1) 45 SOT 172 (HYD.) / 10 taxmann. com 160 (HYD.) / 144 TTJ 520 (HYD.) / 15 ITR(TRIB.) 203 (HYD.) Assessment year 2004-05 –Whether in view of provisions of Rule 10B(4), data to be used in analyzing comparability of an uncontrolled transaction with an international transaction shall be data relating to financial year in which international transaction has been entered into, with only exception being that data of earlier two years may also be considered, if such data reveals facts which could have an influence on determination of transfer prices in relation to transactions being compared – Held, yes – Whether in view of above, data of subsequent period cannot be considered for comparison while determining arm’s length price – Held, yes.
Section 10A of the Income-tax Act, 1961 – Free trade zone – Assessment year 2004-05 – Whether while computing amount of exemption under section 1 0A in respect of software development services, if data link charges are reduced from export turnover, then same should also be reduced from total turnover – Held, yes 10.
What is manufacture • Deputy Commissioner of Income-tax VS. Girnar Industries 35 SOT 11 (COCH)(URO)/ 124 TTJ 517 (COCH) – Assessment year 2004-05 – Assessee-firm, engaged in activities of blending and export of different grades of tea, claimed exemption under section 10A – Whether since term ‘manufacture’ as mentioned in section 10A did not include activity of ‘blending’ at relevant time, assessee’s claim could not be allowed – Held, yes • ToniraPharma Ltd.
VS. Assistant Commissioner of Income-tax, Bharuch Circle, Bharuch 39 SOT 28 (AHD.) – Assessment year 2002-03 – Whether in order to claim benefit of section 10B, essence of determining whether new article or thing is manufactured or produced lies in identity and use of commodity before undergoing processing and after processing – Held, yes – Whether if identity and character of article remain same then there is no manufacturing or production but where identity and character get transformed then it would be a manufacturing or production of new article or thing – Held, yes – Assesseecompany was engaged in business of manufacturing and export of bulk drugs, drugs intermediates, fine chemicals (organic/inorganic), etc.
– During relevant assessment year, assessee purchased ascorbic acid FCC Grade IV and after processing, sold it as ascorbic acid IP Grade – Assessee’s claim for exemption under section 10B was rejected – Whether since there was no material on record to show that use of ascorbic acid FCC Grade IV and ascorbic acid IP Grade was different, it was to be held that no manufacturing or production of any new article or thing had taken place and, therefore, assessee’s claim was rightly rejected by authorities below – Held, yes 11.
Deputy Commissioner of Income-tax, Company Circle I(1), Chennai VS. Astron Document Management (P.) Ltd.16 taxmann.com 33 (CHENNAI) / 49 SOT 46 (CHENNAI)(URO) – Assessment year 2004-05 – Whether gains derived by an assessee on conversions of funds from EEFC account into Indian rupee account, does not have any proximate or direct nexus with export transaction and, therefore, will not be eligible for deduction under section 1 0B – Held, yes – Section 10B of the Income-tax Act, 1961 – Export oriented undertaking – Assessment year 2004-05 –
Whether telecommunication charges attributable to delivery of software outside India by assesseeexporter had to be excluded from export turnover for working out deduction under section 1 0B whether or not billings of assessee specifically included such telecommunication expenses – Held, yes
Orchid Chemicals & Pharmaceuticals Ltd. VS. Joint Commissioner of Income-tax, Special Range-X 97 ITD 277 (CHENNAI) / 98 TTJ (CHENNAI) 32 – Assessment year 1997-98 – Whether an assessee is entitled to claim deduction under section 1 0B of amount which it derives as direct profit by export of goods manufactured in its newly established hundred per cent export oriented unit and any indirect or incidental profit cannot be regarded as profit earned out of main business activity – Held, yes – Whether deduction under section 10B can be allowed on interest income earned by EOU from margin money deposited with bankers for obtaining letter of credit for import of raw materials – Held, no
Tocheunglee Stationery Mfg. Co. (P.) Ltd. VS. Income-tax Officer, Company Ward III(1) 5 SOT 428 (CHENNAI) – Assessment years 2000-01 and 2001-02 –
Whether for purpose of claiming deduction under section 10B, income should be derived from export business and form part of export turnover and assessee should show that profit was received from export for assessment year under consideration – Held, yes – Whether interest received by assessee on deposit made for purpose of getting bank guarantee in favour of Government of India to import goods free of duty was eligible for deduction under section 10B – Held, no Whether excess provision towards incentives and bonus for earlier years written back in books of account under section 41(1), refund of sales-tax, and resale value of special import licence, could be construed as income from export or as forming part of export turnover so as to be eligible for deduction under section 10B – Held, no
Tricom India Ltd. VS. Assistant Commissioner of Income-tax, Central Circle 41, Mumbai 36 SOT 302 (MUM.) – Assessment year 2005-06 – Assessee was engaged in business of providing I.T. (Information Technology) enabled services and BPO transactions – During relevant assessment year, it claimed deduction under section 10B – On examination of details of profits, Assessing Officer found that profit declared by assessee included interest on fixed deposits, miscellaneous income, etc. – Assessing Officer opined that under section 10B(1), deduction was allowable only on profits derived from export of articles or things or computer software and, therefore, no deduction was possible on interest income – Commissioner (Appeals) upheld order of Assessing Officer –
Whether expression ‘derived from’ cannot be ignored in Section 10B(1) because said expression involves only those items of profit eligible for deduction which are derived from such undertaking – Held, yes – Whether since, in instant case, interest income was generated from interest, on FDRs and surplus funds, same could not be held to have been derived from export of I.T.
Taj International Jewelers VS. Income-tax Officer, Ward 33(2), New Delhi 19 SOT 587 (DELHI) – A.Y.2004-05 – Assessee entered into agreement with export house for export of its goods through them – In course of business assessee disclaimed certain export benefits in favour of export house and in lieu thereof received commission as reimbursement of expenses – Assessee claimed that said amount should have been treated as its business income for purpose of deduction allowable under section 10B – Assessing Officer did not accept assessee’s claim and held amount in question as income from other sources; consequently, he denied exemption under section 10B – Commissioner (Appeals) upheld order of Assessing Officer –
Whether since assessee had disclaimed export benefits in respect of certain goods and incentive was received in lieu of said disclaimer, proximate source of receipt was disclaimer of benefits and not export activities per se – Held, yes – Whether, therefore, while income might be attributable to export oriented unit of assessee, it could not be said that same was derived from unit – Held, yes – Whether, in such circumstances, authorities below rightly rejected assessee’s claim – Held, yes 12.
Cadila Exports (P.) Ltd. VS. Deputy Commissioner of Income-tax – 51 ITD 217 (AHD.) / 50 TTJ (AHD.) 603 Assessment year 1986-87 –
Whether income earned by way of interest on deposits of surplus funds could be regarded as incidental to production of goods at industrial undertaking established in free trade zone and, therefore, exemption under section 10A could be allowed on such income – Held, no.
India Comnet International VS. Income-tax Officer 185 TAXMAN 51 (MAD.) / 304 ITR 322 (MAD.) – Assessment year 2002-03 –
Whether interest income earned by assessee-company, being a 100 per cent export-oriented unit, on amount of export proceeds kept in foreign currency deposit account as permitted by FERA under Banking Regulations, would qualify for exemption under section 10A – Held, no
Commissioner of Income-tax VS. MenonImpex (P.) Ltd.128 TAXMAN 11 (MAD.) / 180 CTR 40 (MAD.) / 259 ITR 403 (MAD.) – Assessment year 1985-86 – Assessee had set up a new industrial undertaking in free trade zone – In course of business, assessee was required to open letters of credit with banks for which deposits were made – Interest earned on such deposits was claimed to be exempt on ground that it was derived from newly set up industrial undertaking – Such claim was negatived by Assessing Officer but was allowed by Tribunal –
Whether mere fact that deposit made was for purpose of obtaining letters of credit which letters of credit were, in turn, used for purpose of business of industrial undertaking did not establish a direct nexus between interest and individual undertaking, and, therefore, assessee was not entitled to get benefit under section 10A – Held, yes
MKR Frozen Food Exports Ltd. VS. Income- tax Officer, Ward 6(1), New Delhi 126 ITD 1 (DELHI) – Assessment year 1998-99 – Assessee was engaged in business of export of frozen foods and meals – For this purpose, overdraft facilities were taken from bank to meet liquidity requirements – Subsequently, when assessee earned profit, money so generated was placed in fixed deposits with a bank – Assessee contended that deposits were placed with a view to reduce interest liability, and, therefore, interest income would partake character of profits and gains of business and became eligible for deduction under section 10B – Whether since interest earned from bank deposits did not have direct or proximate connection with business of export of EOU, same would be taxable under residuary head, i.e., ‘Income from other sources’ and was not eligible for deduction under section 1 0B – Held, yes
Assistant Commissioner of Income-tax VS. Shiva Shankar Granites (P.) Ltd.89 ITD 625 (HYD.) / 83 TTJ (HYD.) 802 – Assessment year 1993-94 –
Whether interest on deposit towards bank guarantee money in favour of Central Excise & Customs Department as well as interest on deposit with State Electricity Board cannot be said to have been derived from industrial undertaking, and as such, are not eligible for benefit of exemption under section 10B – Held, yes
CG International (P.) Ltd. VS. Assistant Commissioner of Income-tax, Cir.10(3), Mumbai 13 SOT 280 (MUM.)Assessment year 2001- 02 – Assessee-company, a hundred per cent export oriented unit, was engaged in business of manufacturing of plain and studded Jewellery and export thereof – Assessee claimed exemption qua interest income on ground that interest was earned during ordinary course of export business as same was earned by it from fixed deposits kept with bank for issue of bank guarantees for business purposes and from EEFC account maintained with Bank of India – Assessing Officer rejected assessee’s reply and assessed interest income as assessee’s income from other sources and, accordingly, held same as not exempt under section 1 0B – Whether Assessing Officer was justified – Held, yes
13. For computing the deduction all expenses relatable to that unit must be deducted. Nahar Spinning Mills Ltd. VS. Joint Commissioner of Income-tax, Range VII, Ludhiana 25 taxmann. com 342 (CHD.) / 54 SOT 134 (CHD.)(URO)- Assessment year 2007-08 – Whether while computing profits and gains of eligible units under section 10B all expenditure relatable to such units are to be deducted for computing eligible profits – Held, yes – Whether therefore, remuneration paid to managing director being common expenditure between eligible units and non-eligible unit run by assessee-company it needed to be allocated in order to determine eligible profits of business under section 10B – Held, yes 14.
- Onus is on the successor company to prove that it is the successor.
- Synergies Casting Ltd. VS. Dy.
- Commissioner of Income-tax, Circle 3(2)/ Assistant Commissioner of Income-tax, Circle 3(3), Hyderabad 13 taxmann.com 17 (HYD.) / 139 TTJ 627 (HYD.) / 47 SOT 82 (HYD.)(URO)- Assessment years 2006-07 and 2007-08 – Whether unless assessee who claims benefit under section 1 0B for unexpired period, establishes that it is a successor of a lessor and it fulfils all other necessary conditions in each year, it cannot claim benefit under section 1 0B for balance unexpired period – Held, yes – ‘SDAL’ had an industrial undertaking with facilities of manufacturing of aluminium alloy wheels and was claiming relief under section 10B – Assessee-company took said unit on lease-license for operating and maintaining same to carry on manufacturing activity – Assessee claimed continuation of relief under section 10B for balance unexpired period, which was denied by revenue – Whether since assessee-company had not proved that it was a successor to predecessor who was enjoying benefit of Section 10B and it was found to be only a lessee, having a right to use plant and machinery, claim of exemption under section 1 0B could not be allowed – Held, yes Circulars and Notifications : CBDT Circular F.
,No.15/5/63-IT 15. First year of claim must be established. • Sami Labs Ltd. VS. Assistant Commissioner of Income-tax 20 taxmann.com 785 (KAR.) / 239 CTR 510 (KAR.) / 334 ITR 157 (KAR.)- Assessment year 2002-03 – Starting point of limitation for claiming benefit flowing from section 1 0B would commence from year of manufacture or production of undertaking; assessee would not be able to claim such deduction in subsequent years unless said initial test on date of starting point of limitation has been satisfied • Income-tax Officer, Ward 31(4), New Delhi VS.
VinodChhabra 20 SOT 328 (DELHI) – Assessment year 200 1-02 – For relevant assessment year, assessee, a hundred per cent export oriented undertaking (EOU), claimed exemption under section 10B – Assessing Officer denied exemption under section 10B for certain reasons – He, however, allowed deduction under section 80HHC to assessee in respect of profits and gains derived from export of goods out of India – Commissioner (Appeals), on basis of exemption allowed under section 10B to assessee for assessment year 1994-95, allowed assessee’s claim for exemption under section 10B – Whether since from assessment order for assessment year 1994-95 it was not clear as to in which year assessee started hundred per cent EOU and further since neither Assessing Officer nor Commissioner (Appeals) had examined matter in light of provisions of section 10B, issue was required to be remitted to file of Assessing Officer to examine claim of assessee in light of provisions of section 1 0B – Held, yes – Whether if exemption under section 10B would be allowed, assessee would not be eligible for deduction under section 80HHC – Held, yes.
Assessment year 200 1-02 – Assessee was deriving income from a hundred per cent EOU (Export Oriented Unit) and claimed deduction under section 10B in respect of interest earned on FDRs – Whether since interest income earned by assessee on FDRs was not derived from export of eligible goods of hundred per cent EOU, assessee would not be eligible for exemption under section 10B in respect of interest income – Held, yes 16.
Speculation profit not eligible. Assistant Commissioner of Income-tax, Circle-11(5), Bangalore VS.K. Mohan & Co. (Exports) (P.) Ltd.126 ITD 59 (BANG.) / 130 TTJ 719 (BANG.) / 7 ITR(TRIB.) 507 (BANG.) – Assessment year 2005- 06 – Assessee was engaged in business of manufacture and export of readymade garments – In order to avoid risk of loss due to foreign exchange fluctuation, it entered into forward contracts in respect of foreign exchange to be received as a result of export – During relevant assessment year, assessee claimed deduction under section 10B in respect of its entire income including profits derived from forward contracts – Whether since forward contracts had been taken in respect of 46 per cent of export turnover and it was not an isolated transaction, in view of Explanation 2 to section 28, profit from forward contracts was to be assessed as profit from speculation business – Held, yes – Whether since for purpose of computing deduction under section 10B, speculation business cannot be considered as business of undertaking, Assessing Officer was justified in rejecting assessee’s claim for deduction in respect of profits derived from forward contracts – Held, yes.
Authored by – S.K. Gupta- DIT(Exemption), Ahmedabad (Republished With Amendments)
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What is Section 10 14?
Section 10(14) Daily Allowance (Partially Exempt Income) – When on tour or for the duration of a job transfer, a daily allowance is received by the employee that helps him meet the daily expenses. In simple words, the daily allowance is granted when the individual is not in the regular place of duty.
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What is Section 10 13A and Rule 2A?
1 Section 10(13A) of the Act grants exemption in respect of any house rent allowance received by an employee from his employer subject to the satisfaction of certain basic conditions. Rule 2A prescribes the quantum of exemption admissible.
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What is Section 10 14 II Rule 2BB 2?
What is Transport allowance – Transport allowance in general could mean allowance provided for the purpose of transport. However, transport allowance under Section 10(14) of Income-tax Act,1961 read with rule 2BB of Income-tax rules can be either of the following:
Allowance granted to an employee to meet his expenditure for the purpose of commuting between his place of residence and office/place of dutyAllowance granted to an employee working in 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
What is Section 10 14 I in income tax?
Section 10 (14) (i) – Under Section 10 (14) (i), an allowance received by the employee that is given to meet expenses totally and necessary for the performance of official duties (generally called ‘per diems’), for the expenses that he has already/has to incur, are exempted from taxes. In simple words, the exclusion is granted on the basis of:
Amount of allowance The amount that is actually used for the purpose
Who can claim exemption under Section 10 14 )( II?
Section 10 (14) (ii): Under this section, allowance granted to employees for working under certain set of conditions while on duty. The amount exempted is either the amount received as allowance or the limit mentioned, whichever is lesser.
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What is the maximum limit for Section 10 14?
SPECIAL ALLOWANCES SPECIAL ALLOWANCES ) Special allowance is a fixed amount that is given to employees over and above the basic salary in order to meet certain requirements. There is a taxable allowance and an exempt allowance. There are different categories of special allowances.
| Particulars | Limit of Exemption |
| CATEGORY-1 Exempt lower of: Amount of Allowance Received OR Amount Spent | |
| 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 |
| Any 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 |
| CATEGORY-2 Exempt lower of: Amount of Allowance Received OR Limit specified | |
| Children Education Allowance | Up to 100 per month per child up to a maximum of 2 children is exempt |
| Hostel Expenditure Allowance | Up to 300 per month per child up to a maximum of 2 children is exempt |
| Transport Allowance is granted to an employee to meet expenditure on commuting between place of residence and place of duty | Up to 1,600 per month (3,200 per month for blind and handicapped employees) is exempt |
| 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 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 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 1,000 per month |
| Underground Allowance is granted to employees working in uncongenial, unnatural climate in underground mines | Up to 800 per month |
| Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations) | Amount exempt from tax varies from 300 per month to 7,000 per month.(for more information refer, |
| Border area allowance Remote Locality or allowance or Disturbed Area allowance or Difficult Area Allowance (Subject to certain conditions and locations) | Amount exempt from tax varies from 200 per month to 1,300 per month. for more information refer, |
| Any special allowance in the nature of counter-insurgency allowance granted to the members of armed forces operating in areas away from their permanent locations( Any assessee claiming exemption in respect of the this allowance shall not be entitled to the exemption in respect of disturbed area allowance) | 3,900 per month |
| Highly active field area allowance | It is exempt from tax up to ₹ 4,200 per month. |
| Island duty allowance | It is exempt up to ₹ 3,250 per month. |
| High altitude allowance | It is exempt from tax up to ₹ 1,060 per month ( for altitude of 9,000 to 15000 feet ) or ₹ 1,600 per month (for altitude above 15,000 feet) |
| CATEGORY: 3 | |
| Outstation allowance: 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; orb) 10,000 per month. |
NOTE:-
Difference between Perquisites and Allowance – While the money received by an employee for any objective is known as allowance, perquisites are several facilities offered by employers. Under this section, allowance should not be in the nature of perquisite. Allowance should not be of personal nature.
