Allowances, Fully Taxable Allowances

Allowance is amount paid to employees as a part of salary or disbursement of expenses incurred during course of their regular job duty. Salary structures are normally broke up into basic salary and allowances, out of which basic salary is fully taxable and allowances can be partially or fully taxable or may fully exempted. Allowances provided by company may differ to differ according to their policies.

Fully taxable allowances

The list of fully taxable allowances is as follows (Differs from company to company as per company allowances):-

• Dearness Allowance

This allowance is paid to employees to adjust their cost of living to cope up with inflation is fully taxable

• City compensatory allowance

Fully taxable allowance of salary generally given to employees working in big cities to compensate for the higher standard of living.

• Fixed Medical allowance

It is fixed allowance paid by company per month to employees whether they submit bills or not. It is fully taxable. But employees can claim tax benefit up to Rs.15,000 under medical reimbursement (bills and supporting documents required in this case)

• Tiffin/Lunch/Dinner/Refreshment Allowance

Any allowance paid by company for Tiffin/lunch / Dinner or refreshments is fully taxable

• Servant Allowance

When an employer pays an employee to engage services of a servant, such an allowance is taxable.

• Project Allowance

Any amount paid to employee who are involved in projects or settle expenses incurred during projects on behalf of company

• Overtime Allowance

Any amount paid for overtime is fully taxable

• Telephone allowance

Telephone allowance is fully taxable. However, telephone bill reimbursement is fully exempted.

• Holiday Allowance

This allowance is paid if employee have worked on holiday is fully taxable

• Entertainment Allowance ( Except government employees )

This allowance is payable to employees for expenses incurred for hospitality of customers or clients who meet them in connection with their office or business work. It may paid as fixed amount in salary or out of salary to employees for private sector employees. For government sector is partially exempted.

• Any Other Cash Allowance