Allowance is a fixed quantity of money or otherwise given regularly in addition to salary for the purpose of meeting some particular requirements connected with the service rendered by the employee or as compensation for unusual condition of that service. Special allowances is one of the allowances received by the employee which is exempt upto certain extent.

Allowance exempt to the extent the allowance is used in performance of official duty.

• Any allowance granted to meet the cost of travel on tour or on transfer (including any sum paid in connection with transfer, packing and transportation of personal effects on such transfer).
• Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office. But expenditure for covering the journey between office and residence is not treated as expenditure used in performance of official duty.
• Any allowance, whether granted period on tour or for the journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
• Any allowance to meet the expenditure on a helper where such helper is engaged for the performance of duties of an office.
• Any allowance granted for encouraging the academic, research and other professional pursuits.
• Any allowance to meet the expenditure on the purchase or maintenance of uniform for wear during the performance of duties of an office.

1. Any allowance granted to an employee working in any transport system to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided that such employee is not in receipt of daily allowance – 70% of such allowance up to a maximum of Rs. 10,000/- per month is exempt from tax.

1. Children education allowance – Rs. 100/- per month per child up to a maximum of two children is exempt from tax.

1. Any allowance granted to an employee to meet the hostel expenditure on his child – Rs. 300/- per month per child up to a maximum of two children is exempt from tax.

1. Transport Allowance granted to an employee to meet his expenditure for the purpose of commuting between place of his residence and the place of his duty – Rs. 800/- per month is exempt from tax.

1. Transport Allowance granted to an employee, who is blind or orthopaedically handicapped with disability of lower extremities to meet his expenditure for the purpose of commuting between place of his residence and the place of his duty – Rs. 1,600/- per month is exempt from tax.

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