Illustration On Special Allowance

Important points on allowances
Other allowances – Fully Taxable: (i)Overtime allowance; (ii)Interim allowance; (iii)Project allowance;
(iv)Warden allowance; (v)Non-practicing allowance; (vi)City compensatory allowance; (vii)Fixed
medical allowance; (viii)Servant allowance; (ix)Tiffin/Lunch/Dinner allowance; (x)Dearness allowance;
(xi)Any other cash allowance.
Other allowances – Fully Exempt: (i)Allowance to High Court Judges; (ii)Allowance received from
United Nations Organisation (UNO); (iii)Compensatory allowance under Article 222(2) of the
Constitution received by Judges; (iv)Sumptuary Allowance given to High Court Judges and Supreme
Court Judges; and (v)Allowances to Indian citizens employed abroad by Government of India u/s. 10(7).
Illustration on special allowance

A. CA Varshan is in receipt of the following allowances from his employer, Hari & Associates, a
practising CA firm for the year 2020-21:
1. Conveyance allowance Rs.600 pm. He spends Rs.5,000 during the previous year for
official purposes;
2. Transport allowance Rs.2,200pm for commuting from residence to office and back. He
spends Rs.1,400pm during the year;
3. Uniform allowance Rs.5,000 p.a. He spends Rs.4,000 on the purchase and maintenance
of uniform;
4. Education and hostel expenditure allowance Rs.450 pm per child for 3 children;
5. Personal assistant allowance Rs.2,000pm. He engaged the personal assistant for official
work and paid him salary of Rs.1,500pm for 9 months. Personal assistant spends 60% of
his time for official works of Hari & Associates.
Compute the taxable amount of allowances with reasons for inclusion, exclusion and claim of
exemptions.
Solution: Computation of taxable allowances:
S.No. Description Amount Amount Reasons

1. Conveyance allowance XXXX
Less: Exemption YYYY ZZZZ ???????
2.
3.
4.
5.
Total taxable allowance to ZZZZZZZZZZZZ

be included in gross salary
B. Mr. Kapil is in receipt of the following allowances and seeks your advice about the taxable
quantum of these allowances:
i)Helper allowance Rs. 300 p.m. Mr. Kapil had appointed a helper for 9 months during the year to whom
he paid Rs. 200 p.m.
ii) Conveyance allowance of Rs. 750 p.m. Mr. Kapil owns a car which is used both for personal purposes
and official purposes. Total monthly expenses amounts to Rs. 1,200 of which 40% is attributable to
office use.
iii) During the year Mr. Kapil received education allowance for his 3 children a sum of Rs. 250 p.m. each
towards education and hostel expenditure. All the children are staying in hostel.
iv) During the year for six months Mr. Kapil was posted at Kandala, a hilly area located at a height of
1,200mts. above sea level. Hill compensatory allowance of Rs. 2,400 has been received by him at Rs. 400
p.m.
Ans: Computation of taxable quantum of various allowances of Mr. Kapil AY 2021-22
Particulars Rs. Rs.
Helper allowance received

Less: Exempt
Conveyance allowance received
Less: Exempt
Education & hostel expenditure allowance
Less: Education & hostel expenses
Hill compensatory allowance
Less: Exempt
Taxable amount of allowances
Reasons: ???????????????????????????????//
Exercises
C. Mr. Arvind is working in Indian Railways and apart from basic salary, he is paid the following
allowances:
i) Entertainment allowance Rs. 1200 p.m. (Basic Salary Rs. 50,000 p.a.)
ii) Uniform allowance Rs. 800 p.m. Actual amount spent Rs. 500 p.m.
iii) Conveyance allowance Rs.2000 p.m. Spent for office purposes Rs.1200 p.m.
iv) Special allowance to meet personal expenses while on duty Rs. 5000 p.m.
v) Education and hostel expenditure allowance Rs. 500 p.m. He has two children studying in school by
staying in hostel.
Determine the taxable amount of the above allowances
D. Mr. Chaithanya residing in Pune, receives the following allowances during FY 2020-21 apart
from
getting a basic salary of Rs. 10,000 p.m. and wants to know the taxable amount of salary.
Entertainment allowance Rs. 750 p.m. H.R.A. Rs. 1200 p.m. (actual rent paid Rs.1,000 p.m.);
Helper allowance Rs. 400 p.m. from out of which he pays Rs. 250 p.m. to helper employed by him.
Rs. 5000 towards uniform making allowance and Rs.200 p.m. towards uniform maintenance allowance.
This amount fully spent for the said purpose. Transport allowance Rs. 2,000 p.m.; Educational allowance
of Rs.300 p.m. per child and Hostel expenditure allowance of Rs. 400 p.m. per child is received for his
children who stay in hostel for studies.

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Important points on allowances

(iv)Warden allowance; (v)Non-practicing allowance; (vi)City compensatory allowance; (vii)Fixed

medical allowance; (viii)Servant allowance; (ix)Tiffin/Lunch/Dinner allowance; (x)Dearness allowance;

(xi)Any other cash allowance.

Illustration on special allowance

Solution: Computation of taxable allowances:

S.No. Description Amount Amount Reasons

Total taxable allowance to ZZZZZZZZZZZZ

Particulars Rs. Rs.

Helper allowance received

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