1. Discuss various types of allowances which are paid to the employees. What is their taxability?
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heya!!
here is ua answer:
An allowance is the financial benefit given to the employee by the employer over and above ... Some of these allowances are taxable under the head Salaries. allowances in salary?
Let's understand the meaning of an Allowance
An allowance is the financial benefit given to the employee by the employer over and above the regular salary. These benefits are provided to cover expenses which may be incurred to facilitate the discharge of service - for eg. Conveyance allowance is paid to foot expenses incurred for commuting to workplace. Some of these allowances are taxable under head 'salary '. A few of them again could be partly taxable and few others are non taxable or fully exempt from taxes.
Here's a glance at allowances that are taxable.
Taxable Allowance
Dearness allowance: Dearness allowance (DA) is an allowance paid to an employee as a cost of living adjustment allowance paid to the employee to cope with inflation. DA paid to employee is fully taxable with salary.
Entertainment allowance: Employees are the lowest of the declared amount - One fifth of basic salary, actual amount received as allowance or Rs. 5,000. This is an allowance provided to employees to reimburse the expenses incurred on the hospitality of customers. However government employees can claim exemption in the manner provided in section 16(ii). All other employees have to pay tax on it.
Overtime Allowance: Employer may provide an overtime allowance to employees working over and above the regular work hours. This is called overtime and any allowance received for this is fully taxable.
City compensatory allowance: This allowance is paid to the employees in an Urban centre which may be highly expensive and to cope with inflated living costs in the cities.
Interim allowance: when an employer gives any interim allowance in leiu of final allowance, this becomes fully taxable.
hope it helps!!
here is ua answer:
An allowance is the financial benefit given to the employee by the employer over and above ... Some of these allowances are taxable under the head Salaries. allowances in salary?
Let's understand the meaning of an Allowance
An allowance is the financial benefit given to the employee by the employer over and above the regular salary. These benefits are provided to cover expenses which may be incurred to facilitate the discharge of service - for eg. Conveyance allowance is paid to foot expenses incurred for commuting to workplace. Some of these allowances are taxable under head 'salary '. A few of them again could be partly taxable and few others are non taxable or fully exempt from taxes.
Here's a glance at allowances that are taxable.
Taxable Allowance
Dearness allowance: Dearness allowance (DA) is an allowance paid to an employee as a cost of living adjustment allowance paid to the employee to cope with inflation. DA paid to employee is fully taxable with salary.
Entertainment allowance: Employees are the lowest of the declared amount - One fifth of basic salary, actual amount received as allowance or Rs. 5,000. This is an allowance provided to employees to reimburse the expenses incurred on the hospitality of customers. However government employees can claim exemption in the manner provided in section 16(ii). All other employees have to pay tax on it.
Overtime Allowance: Employer may provide an overtime allowance to employees working over and above the regular work hours. This is called overtime and any allowance received for this is fully taxable.
City compensatory allowance: This allowance is paid to the employees in an Urban centre which may be highly expensive and to cope with inflated living costs in the cities.
Interim allowance: when an employer gives any interim allowance in leiu of final allowance, this becomes fully taxable.
hope it helps!!
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