Allowance is defined as a fixed amount of money paid by employers to their employees to meet certain expenditures above basic salary. For example, organizations pay overtime over and above basic salary to employees when they work for additional hours. Similarly, there are many other allowances as a component of salary.

  • Dearness Allowance

To neutralize the impact of inflation, an allowance is given to the public sector and government employees and pensioners called a dearness allowance. Dearness allowance is fully taxable with salary and according to the Income Tax Act it becomes mandatory to declare the tax liability for dearness allowance along with the salary in the filed return.
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  • Meal Allowance
    Meal allowance can be provided by the employer through the provision of meals during office working hours or through pre-paid food cards or digital coupons.
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  • Medical Allowance
    Medical allowance is a fixed allowance paid to the employees of a company every month irrespective of whether they submit the bills to substantiate the expenditure or not.
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  • House Rent Allowances
    House rent allowance is the allowance that is provided by the company to the employee for the purpose of accommodation. This allowance is applicable only if the employee is living in a rented house.
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  • Special Allowances
    According to section 14(i), allowances that are paid to the employee for the performance of duty are called as special allowances. Examples of such allowance are the children’s education allowance or the children hostel allowance wherein the amount is paid by the employer for the education or for the hostel expenses of the employee’s children.
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  • Travel Allowance 
    Travel allowance covers costs related to travel while on tour or on transfer while on duty. This allowance also includes travel costs incurred while getting transferred to another location, including packaging or transport of personal objects.  
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  • Custom Allowance
    If any other allowance is to be added other than the provided allowances, that allowance will come under custom allowances. 
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  • Specific Allowance
    If any allowance is to be added for a specific date at any point of time, that can be added under Specific Allowance. 
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