Non-taxable allowance is the amount of money you give your employees along with their regular salary. It is done by the employers to help their employees cover the regular expenses related to their jobs like travel, rent, and other similar costs.
As the name suggests, this income is not taxable, so the employee doesn’t have to pay any taxes on it
- List of Non-Taxable Allowances in India
- Non-Taxable Allowances for Employees
- Non-Taxable Allowance in Salary
- Non-Taxable Housing Allowance
- Which Allowances Are Non-Taxable
- Is Non-practicing Allowance Taxable
- How Much Percentage of Transport Allowance Is Non-Taxable
- Is It Necessary to Mention Non-Taxable Allowance in ITR
- Non-Taxable Allowances Made Easy
List of Non-Taxable Allowances in India
Here is a list of the non-taxable allowances that are available for employees in India.
- HRA
- Rent of the employee except for the 10% of the basic salary they’re paid.
- 40% of the salary of the employees (including basic salary with DA) for all the non-metro cities.
- 50% of the salary (same, basic salary + DA) for the employees in metro cities.
- Medical allowances: the employees don’t pay tax for upto 15000 INR annually.
- Special allowances: these allowances can cover personal expenses.
- Conveyance allowances: these allowances are tax free for upto 1600 INR monthly.
- Allowances paid to the government employees.
- Allowances paid to UNO employees.
- Other tax-free allowance includes academic allowances, daily allowances, helper allowances, and uniform allowances for employees.
Non-Taxable Allowances for Employees
The non-taxable allowances paid to employees are usually uniform allowance, perquisites for the government employees or other allowances allowed for Indian citizens in other countries, benefits given to the UNO employees under section 002 of the United Nations (UN) act, compensatory allowances that are given to judge under Article 222(2) of the constitution, sumptuary allowances for high court judges under section 22C, helper allowances, and any other free taxable allowances.
Non-Taxable Allowance in Salary
The non-taxable allowances in salary are usually for government employees, judges of Supreme Court and High Court, and employees of the UNO (United Nations Organization).
We have already discussed all of the above in the list of the non-taxable allowance given to employees.
Non-Taxable Housing Allowance
The non-taxable housing allowance is basically half of the employee’s salary that’s eligible for HRA tax exemption. But this is subject to a condition and that’s they must be living in a metro city to exempt this allowance.
Some of the metropolitan cities in India are Delhi, Calcutta, Chennai, and Mumbai.
If an employee is living in a non-metro city, then they’re only eligible for HRA that can be worth 40% of their salary.
Which Allowances Are Non-Taxable
Allowances that are non-taxable are the same that we discussed above:
- Perquisites for government employees or other allowances allowed for Indian citizens in other countries
- Benefits given to UNO employees under section 002 of the United Nations (UN) Act
- Compensatory allowances for judges under Article 222(2) of the constitution
- Sumptuary allowances for high court judges under section 22C
- Helper allowances
- Any other free taxable allowances
Is Non-practicing Allowance Taxable
Non-practicing allowances are basically the benefits given to doctors working for health centres, railways, or any other department coming under central, union, or state government.
To answer the question, no. All the non-practicing allowances paid to the salaried employees are taxable.
How Much Percentage of Transport Allowance Is Non-Taxable
If you go as low as 10K monthly, then 70% of your transport allowances can be fully exempted that means they are non-taxable.
Although, this benefit is only given to employees who have to use transport to go from one place to another due to their official responsibilities. However, it’s important to note that they do not receive daily allowances.
Is It Necessary to Mention Non-Taxable Allowance in ITR
Yes, you need to mention the non-taxable allowance you have received within a financial year.
Non-Taxable Allowances Made Easy
Whether you’re an employee or an employee, it’s important for both of you to understand the non-taxable allowances. These allowances are given to you along with your basic salary to make your lives easier.
Although, the rules are different for different types of employees serving in different departments, different sectors—public sector and private sector—living in different types of cities—metro cities and non-metro cities. Yet, the benefits are given to make your life easier depending on your living areas and responsibilities.
Having read this article, you should have gained a certain grasp on this topic. It should be helpful for you.