Unlock Your Payslip: Decoding Taxable, Partially Exempt, and Tax-Free Allowances
Personal Finance
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CNBC TV18•13-01-2026, 18:41
Unlock Your Payslip: Decoding Taxable, Partially Exempt, and Tax-Free Allowances
- •Allowances are payments above basic pay, taxable by default unless specifically exempted under Income Tax Act.
- •Dearness Allowance (DA), Overtime Pay, City Compensatory Allowance (CCA), and most Transport/Medical allowances are fully taxable.
- •House Rent Allowance (HRA), Children Education/Hostel Allowance, and certain transport/hardship allowances are partially taxable with specific exemption limits.
- •Allowances for official duties (travel, conveyance, uniform) are tax-free only to the extent actually spent for official purposes.
- •Understanding allowance taxation helps in effective tax planning to reduce overall taxable income.
Why It Matters: Know your allowances: Some are fully taxed, some partially exempt, and some tax-free based on specific rules.
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