Jun 202016

Special Allowance Calculation Rules Eligibility exemption limit Taxation Under 7th Pay Commission

Special allowance diverges from company to company. Some companies offer any kind of allowance to employees for enhancing efficient performance of responsibilities. Money acquired by an employee for any intention is known as allowance. If it is purposely granted to employees, it is not liable to the coverage of actual expenses incurred. Special allowance will not fit into any additional head in a salary slip. Dissimilar components of a pay slip involving benefits are allocated and the left over sum of money which creates up the annual CTC forms element of special allowance.

Special Allowance Calculation Rules Eligibility exemption limit Taxation

Special Allowance Rules and eligibility 

Certain set of rules are framed to acquire the benefits of special allowance. Benefit should not be in the form of a perquisite. There is no upper limit approved for allowances covered under two different clauses. Allowance should not be of individual nature. Employees working in underground mines are established with underground allowance. Members involving in research institutions are funded with academic or research allowance. This kind of benefit is exempt for Income Tax while accumulating is chargeable. Employees having two children are provided with both hostel and children education allowance.

Below listed table describes the important details about special allowances which must be aware by all employees.

S.No Facts about Special Allowances Detailed Information
1 What are special allowances? Special allowances are can be referred as reward in order to boost the employees on their performance. Often special allowances will get various depending upon the company guidelines and employees performance.
2 Whether Special Allowances are Taxable? Yes! As per the Indian constitutional law, amount received under special allowances category are 100% taxable.
3 Whether Special Allowances varies by time to time? Yes! As it’s fully depends upon the employees functionality and performance, allowance amount will varies according to individual performance.
4 Are there any categories under special allowances? In general, special allowances divided into with two categories namely Personal allowances and official allowances. Each category has separate list of allowances.
5 How Special allowances calculated? Well, for calculation special allowances one need to breakdown all components of salary slip. Also it includes the detection of PF, TDS and PT

Special allowance taxation 

Allowance is a part of salary and chargeable if no certain discharge is offered below the Income Tax Act. Special allowance is deliberately granted to satisfy outlays necessarily and wholly incurred during the performance of tasks. Specific kind of allowances is exempted from Income Tax as per division 10(14) of the Income Tax Rules. Two different clauses are included in the section 10(14). According to clause (i), any benefit not in the temperament of a perquisite within the significance of clause (ii).

Special allowance exemption limit

Exemption limit of the special allowance differ as per the type of allowance. Employee is granted to the maximum exemption of Rs.100 under children education allowance. Excess amounts are taxable as per the norms. Hostel allowance is granted with utmost exception of Rs. 300 per month and surplus is payable. The highest discharge of Rs. 800 pm is awarded for employees working in subversive mines. Employees of armed forces are granted with utmost exemption of Rs. 3250 per month for performance of duties. However, it may get varied depending upon the performance. It would be wise to consult with the HR department regarding the special allowances limits and ranges.

Which types of allowance are considered as special allowance? 

Special allowances are salaried on a monthly basis and are chargeable. Personal and official are the two different categories of special allowances. Uniform allowance includes payments on procure and preservation of uniform worn throughout the job performance. Employees working in underground mines are granted with underground allowance. Handicapped employees obtain maximum of Rs.3200 as a transport allowance per month. Academic allowance is granted for cheering intellectual research and teaching pursuits in research institutions. Conveyance allowance includes expenses acquired on transportation during performance of duties of a service of profit.

Special allowance calculation 

Calculation of special allowance can be identified by flouting down the entire elements of a salary slip. Salary structure differs from one company to another company. But, the pay slip of the large companies include with gross salary, total deduction, CTC, variable and net pay. Gross pay is full amount pay prior to taxation and deduction. HRA is applicable for employees living in a rented house and DA is mostly depends on company policy. Special allowance is also depends on company plan and it is taxable.

Special allowance facility under 7th pay commission 

Special entitlements are included in the 7th pay commission for the benefits of employees. Women with disabilities are granted with special allowance at the rate of Rs. 1,500 per month for child care. Transport allowance is increased than the normal rate to a minimum of Rs.1000 pm. Constant attendance allowance is specially granted for retired employees at the rate of Rs. 4500 pm. In case, the disability is job related, disability retirement fund and special disability leave are granted as additional provisions. With lot of expectation in allowances department, 7th Pay commission expected to hit soon.

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