Fully Taxable allowances:
- Dearness Allowance: The allowance is paid to the employees to cope with inflation.
- Entertainment Allowance: This is an allowance that is provided to the employees to reimburse the expenses which are incurred on the hospitality.
- Overtime Allowance: Overtime allowance is the allowance which is paid to the employees for working above the regular work hours.
- City Compensatory Allowance: This allowance is paid to those employees who move to urban cities.
- Project Allowance: When an employer provides an allowance to the employees to meet the project expenses.
- Tiffin/Meals Allowance: Employees may be provided with meal allowances in some cases.
- Cash Allowance: Employer may also provide cash allowance in some cases like for marriage or holiday purposes.
Partly Taxable allowances:
- House Rent Allowance: It is the allowance that an employer pays to his employee for accommodation.
- Entertainment allowance
- Special allowances like allowance for travel, uniform, research allowance etc.
- Special allowance to meet personal expenses like children’s education allowance, children hostel allowance etc.
Non Taxable allowances:
- Allowances that is paid to the Govt. servants abroad: When the government employee of India are paid allowances when they are serving abroad.
- Sumptuary allowances: Sumptuary allowances which are paid to the judges of HC and SC are not taxed.
- Allowance paid by UNO: Allowances which is received by the employees of UNO are fully exempt from tax.
- Compensatory allowance paid to judges: When a judge receives a compensatory allowance, it is also not taxable.
It may be noted that a person can save tax on income from salary by getting the Tax Saving Allowances.
