different types of allowances

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Different Different types of types of Allowances Allowances Presented By; Presented By; 1) 1) Mayur Khatri Mayur Khatri

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Different types of Allowances

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Page 1: Different types of allowances

Different types

Different types

of Allowances

of Allowances

Presented By;

Presented By;

1)1)Mayur Khatri

Mayur Khatri

Page 2: Different types of allowances

Mayur Khatri

Page 3: Different types of allowances

What is What is Allowance?

Allowance?

• A sum of money paid regularly A sum of money paid regularly to a person, typically to meet to a person, typically to meet specified needs or expensesspecified needs or expenses

• Allowance are generallyAllowance are generally Calculated on Basic Calculated on Basic salarysalary

Page 4: Different types of allowances

What is Basic

What is Basic Salary?Salary?

Basic salary is the fixed salary, invariable, Basic salary is the fixed salary, invariable, minimum wages, mandatory pay, fixed by minimum wages, mandatory pay, fixed by the company to pay the employees. the company to pay the employees.

As per the legislative fixation, 30% to As per the legislative fixation, 30% to 60% of your salary shall be your basic 60% of your salary shall be your basic pay,pay,

i.e., not less than 30% of your gross pay i.e., not less than 30% of your gross pay or take home salary and not more than or take home salary and not more than 60%, shall be basic pay60%, shall be basic payattribution

Page 5: Different types of allowances

Types of Types of Allowances

Allowances

1.Fully exempted allowances.1.Fully exempted allowances.

2. Partly exempted allowances.2. Partly exempted allowances.

3. Fully taxable allowances3. Fully taxable allowances

Page 6: Different types of allowances

Dearness Dearness Allowance

Allowance

DA is a cost of living adjustment allowance paid to DA is a cost of living adjustment allowance paid to Government employees and pensioners in India.Government employees and pensioners in India.

As of June 2012, the Dearness Allowance is As of June 2012, the Dearness Allowance is calculated as a percentage of an Indian citizen's calculated as a percentage of an Indian citizen's basic salary to mitigate the impact of inflation on basic salary to mitigate the impact of inflation on people belonging to the low income group. people belonging to the low income group.

The guidelines that govern the DA vary according The guidelines that govern the DA vary according to where one lives (for example, whether rural or to where one lives (for example, whether rural or urban)..urban)..

((DA Rates for the Central Government DA Rates for the Central Government Employees)Employees)

(July 01, 2013 Dearness Allowance Rate: 90%)(July 01, 2013 Dearness Allowance Rate: 90%)

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Page 7: Different types of allowances

House Rent

House Rent AllowanceAllowance

HRA is generally paid as component of salary HRA is generally paid as component of salary package. This allowance is given by an package. This allowance is given by an employer to an employee to meet the cost of employer to an employee to meet the cost of renting an accommodation. renting an accommodation. 

Least of following exempt from Tax U/S Least of following exempt from Tax U/S 10(13A)

1. Residential house in Metro city - 50 % of 1. Residential house in Metro city - 50 % of SalarySalary

Residential house at other place - 40% of Residential house at other place - 40% of SalarySalary

2. Actual House rent allowance received.2. Actual House rent allowance received.

3. Rent paid in excess of 10 % of salary.3. Rent paid in excess of 10 % of salary.

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Page 8: Different types of allowances

Conveyance

Conveyance AllowanceAllowance(Transport Allowance)

(Transport Allowance)

The conveyance allowance is a type of allowance The conveyance allowance is a type of allowance which is paid to the employees of the state As which is paid to the employees of the state As well as central govt. employees in order to meet well as central govt. employees in order to meet the expenses to come to office from the the expenses to come to office from the residence of the employeesresidence of the employees

It varies on the basis of the city of posting, It varies on the basis of the city of posting, distance of the employees from the residence to distance of the employees from the residence to office & type of conveyance used to travel.office & type of conveyance used to travel.

CA is exempted U/S 10(14) read with Rule 2BB CA is exempted U/S 10(14) read with Rule 2BB upto Rs. 800/- p.m. upto Rs. 800/- p.m.

If person blind or OD then upto Rs. 1600/- P.m.If person blind or OD then upto Rs. 1600/- P.m.

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Page 9: Different types of allowances

City Compensatory

City Compensatory AllowanceAllowance

It is an allowance paid by employer to It is an allowance paid by employer to compensate high cost incurred by employee compensate high cost incurred by employee work in big cities like Delhi, Mumbai, Bangalore, work in big cities like Delhi, Mumbai, Bangalore, and other metropolitan cities. and other metropolitan cities.

However, it is a fully taxable allowance. i.e. the However, it is a fully taxable allowance. i.e. the amount of this allowance will be taxed with the amount of this allowance will be taxed with the salary received. salary received.

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Page 10: Different types of allowances

Foreign Allowance

Foreign Allowance

This allowance is paid by the Government of This allowance is paid by the Government of India to its citizen employees for being posted India to its citizen employees for being posted outside the country and it is not included in total outside the country and it is not included in total income. It is completely tax-free U/S 10 (7).income. It is completely tax-free U/S 10 (7).

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Page 11: Different types of allowances

Helper Allowance

Helper Allowance

Exempt to the extent incurred on helper where such Exempt to the extent incurred on helper where such helper is engaged for performance of official duties. helper is engaged for performance of official duties. 

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Page 12: Different types of allowances

Pranati Patel

Page 13: Different types of allowances

Children Education

Children Education AllowanceAllowance

Children Education Allowance Children Education Allowance Paid for Paid for education of Employee’s children. Exempt up to education of Employee’s children. Exempt up to Rs. 100/- per month per child up to maximum of Rs. 100/- per month per child up to maximum of 2 child if Expenses made in India.2 child if Expenses made in India.

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Page 14: Different types of allowances

Children Hostel

Children Hostel AllowanceAllowance

Children Hostel Allowance Children Hostel Allowance Paid for education Paid for education of employee’s children. Exempt up to Rs. 300/- of employee’s children. Exempt up to Rs. 300/- per month per child up to maximum of 2 child if per month per child up to maximum of 2 child if expenses made in India.expenses made in India.

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Page 15: Different types of allowances

Tiffin/Lunch

Tiffin/Lunch AllowanceAllowance

Tiffin / Lunch Allowance It is fully taxable. It is given to employees for lunch as coupons or added as part of salary.

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Page 16: Different types of allowances

Non Practicing

Non Practicing AllowanceAllowance

Non practicing Allowance This is normally given to Non practicing Allowance This is normally given to those professionals (like medical doctors, chartered those professionals (like medical doctors, chartered accountants etc.) who are in government service accountants etc.) who are in government service and are banned from doing private practice. It is to and are banned from doing private practice. It is to compensate them for this ban. It is fully taxable.compensate them for this ban. It is fully taxable.

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Page 17: Different types of allowances

Overtime Allowance

Overtime Allowance

Overtime Allowance When an employee works Overtime Allowance When an employee works for extra hours over and above his normal hours for extra hours over and above his normal hours of duty, he is given overtime allowance as extra of duty, he is given overtime allowance as extra wages. It is fully taxable.wages. It is fully taxable.

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Page 18: Different types of allowances

Retaining Allowance

Retaining Allowance

It means an allowance payable for the time being It means an allowance payable for the time being to an employee of any factory or other to an employee of any factory or other establishment during any period in which the establishment during any period in which the establishment is not working, for retaining his establishment is not working, for retaining his services services

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Page 19: Different types of allowances

Medical Allowance

Medical Allowance

Medical Allowance is a fixed monthly allowance which forms a part of Salary. It is paid as a fixed amount which is determined as per the company’s policy where an individual is employed  and it has no relevance with the medical expenses incurred.

Medical Allowance is added in taxable income under the head “Salaries” and it is fully taxable.

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Page 20: Different types of allowances

Entertainment

Entertainment AllowanceAllowance

Money which given by employer is allowed by his or Money which given by employer is allowed by his or her company to spend on meals with visitorsher company to spend on meals with visitors

In the case of a Government employee (i.e., Central In the case of a Government employee (i.e., Central Government or a State Government employee), the Government or a State Government employee), the least of the following is deductible:least of the following is deductible:

Rs. 5,000/-Rs. 5,000/-20% of basic salary ; or20% of basic salary ; orAmount of entertainment allowance granted during Amount of entertainment allowance granted during the previous year.the previous year.

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Page 21: Different types of allowances

Uniform Allowance

Uniform Allowance

Any allowance, which is granted to meet the Any allowance, which is granted to meet the expenditure incurred on purchase or expenditure incurred on purchase or maintenance of uniforms to wear during the maintenance of uniforms to wear during the performance of the duties of an office. performance of the duties of an office.

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