1.b Allowances available to different categories of Tax Payers

[AY 2017-18]

S. No. Section Particulars Limit of exemption Exemption available to
A. Under the head Salaries
1. 10(7) Any allowance or perquisite paid or allowed by Government to its employees posted outside India Entire Amount Individual- Salaried Employee (being a citizen of India)
2. Allowances to Judges of High Court/Supreme Court Exempt, subject to certain conditions. Individual – Judges of High Court/Supreme Court
3. Compensatory allowance received by a Judge under article 222(2) of the Constitution Fully Exempt Individual – Judges
4. Salary and allowances received by a teacher /professor from SAARC member state (Subject to certain conditions). Fully Exempt Individual – Teacher from SAARC member State
5. 10(45) Following allowances and perquisites given to serving Chairman/Member of UPSC is exempt from tax:

a) Value of rent free official residence

b) Value of conveyance facilities including transport allowance

c) Sumptuary allowance

d) Leave travel concession

Fully Exempt Individual – Chairman/Member of UPSC
6. 10(45) Allowances to Retired Chairman/Members of UPSC Exempt subject to maximum of Rs. 14,000 per month for defraying the services of an orderly and for meeting expenses incurred towards secretarial assistant on contract basis. Individual – Retired Chairman/Member of UPSC
7. Allowances paid by the UNO to its employees Fully Exempt Individual – Government employee Individual – Employees of UNO
8. 16 (ii) Entertainment Allowance received by the Government employees (Fully taxable in case of other employees) Least of the following is exempt from tax:

a) Rs 5,000

b) 1/5th of salary (excluding any allowance, benefits or other perquisite)

c) Actual entertainment allowance received

Individual – Government Employee
9. 10(13A) House Rent Allowance (Sec. 10(13A) & Rule 2A) Least of the following is exempt:

a) Actual HRA Received

b) 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Madras)

c) Rent paid minus 10% of salary

* Salary= Basic + DA (if part of retirement benefit) + Turnover based Commission

Note:

i. Fully Taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent

ii. It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than Rs. 1,00,000 [Circular No. 08 /2013 dated 10th October, 2013].

Individual – Salaried employee
10. 10(14) Children Education Allowance Up to Rs. 100 per month per child up to a maximum of 2 children is exempt Individual – Salaried employee
11. 10(14) Hostel Expenditure Allowance Up to Rs. 300 per month per child up to a maximum of 2 children is exempt Individual – Salaried employee
12. 10(14) Transport Allowance is granted to an employee to meet expenditure on commuting between place of residence and place of duty Up to Rs. 1,600 per month (Rs. 3,200 per month for blind, deaf, dumb and handicapped employees) is exempt Individual – Salaried employee
13. Sec. 10(14) Allowance granted to an employee working in any transport business to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided employee is not in receipt of daily allowance. Amount of exemption shall be lower of following:

a) 70% of such allowance; or

b) Rs. 10,000 per month.

Individual – Salaried employee
14. 10(14) Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office Exempt to the extent of expenditure incurred for official purposes Individual – Salaried employee
15. 10(14) Any Allowance to meet the cost of travel on tour or on transfer Exempt to the extent of expenditure incurred for official purposes Individual – Salaried employee
16. 10(14) Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty Exempt to the extent of expenditure incurred for official purposes Individual – Salaried employee
17. 10(14) Helper/Assistant Allowance Exempt to the extent of expenditure incurred for official purposes Individual – Salaried employee
1. 10(14) Research Allowance granted for encouraging the academic research and other professional pursuits Exempt to the extent of expenditure incurred for official purposes Individual – Salaried employee
2. 10(14) Uniform Allowance Exempt to the extent of expenditure incurred for official purposes Individual – Salaried employee
3. Sec. 10(14) Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations) Amount exempt from tax varies from Rs. 300 per month to Rs. 7,000 per month. Individual – Salaried employee
4. Sec. 10(14) read with Rule 2BB Border area allowance Remote Locality or allowance or Disturbed Area allowance or Difficult Area Allowance (Subject to certain conditions and locations) Amount exempt from tax varies from Rs. 200 per month to Rs. 1,300 per month. Individual – Salaried employee
5. Sec. 10(14) Tribal area allowance in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Orissa Up to Rs. 200 per month Individual – Salaried employee
6. Sec. 10(14) Compensatory Field Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations) Up to Rs. 2,600 per month Individual – Salaried employee
7. Sec. 10(14) Compensatory Modified Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations) Up to Rs. 1,000 per month Individual – Salaried employee
8. Sec. 10(14) Counter Insurgency Allowance if this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations) Up to Rs. 3,900 per month Individual – Members of Armed Forces
9. Sec. 10(14) Underground Allowance is granted to employees working in uncongenial, unnatural climate in underground mines Up to Rs. 800 per month Individual – Salaried employee
10. Sec. 10(14) High Altitude Allowance is granted to armed forces operating in high altitude areas (Subject to certain conditions and locations)  a) Up to Rs. 1,060 per month (for altitude of 9,000 to 15,000 feet)

b) Up to Rs. 1,600 per month (for altitude above 15,000 feet)

Individual – Members of Armed Forces
11. Sec. 10(14) Highly active field area allowance is granted to members of armed forces (Subject to certain conditions and locations) Up to Rs. 4,200 per month Individual – Members of Armed Forces
12. Sec. 10(14) Island Duty Allowance is granted to members of armed forces in Andaman and Nicobar and Lakshadweep group of Island (Subject to certain conditions and locations) Up to Rs. 3,250 per month Individual – Members of Armed Forces
13. City Compensatory Allowance Fully Taxable Individual – Salaried employee
14. Fixed Medical Allowance Fully Taxable Individual – Salaried employee
15. Tiffin/Lunch/Dinner/Refreshment Allowance Fully Taxable Individual – Salaried employee
16. Servant Allowance Fully Taxable Individual – Salaried employee
17. Dearness Allowance Fully Taxable Individual – Salaried employee
18. Project Allowance Fully Taxable Individual – Salaried employee
19. Overtime Allowance Fully Taxable Individual – Salaried employee
20. Telephone Allowance Fully Taxable Individual – Salaried employee
21. Holiday Allowance Fully Taxable Individual – Salaried employee
22. Any Other Cash Allowance Fully Taxable Individual – Salaried employee
B. Under the head Income from house property
1. First proviso to section 23(1) Municipal tax levied by local authority and borne by owner in respect of house property Amount actually paid during the relevant previous year All assessee
2. 24(a) Standard Deduction 30% of the Annual Value (Gross Annual Value- Municipal Taxes) All assessee
3. 24(b) Interest incurred on borrowed capital Interest on borrowed capital is allowed as deduction from income from house property as under:

a) Up to Rs. 2,00,000 (if amount is borrowed for construction/acquisition of self-occupied house property on or after 01-04-1999), subject to certain other conditions

b) Up to Rs. 30,000 (if amount is borrowed for reconstruction, repair or renewals of self-occupied house property)

c) Actual amount of interest paid or payable during the year (in case of let-out property)

d) Pre-construction period interest is allowed in 5 annual equal installments (Subject to certain conditions)

All assessee
4. Section 25A Standard Deduction from arrears of rent or unrealized rent received subsequently 30% of arrears of rent or unrealized rent. All assessee
C. Under the head Profits and gains from business or profession
1. 32(1) Depreciation in respect of:

i) Tangible assets (buildings, machinery, plant or furniture);

ii) Intangible Assets (know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature)

Depreciation shall be allowed at prescribed percentage on actual cost of an asset.

However, if asset is acquired and put to use for less than 180 days during the previous year, the deduction shall be restricted to 50% of depreciation computed above.

Taxpayer engaged in business of generation or generation and distribution of power.

Note:

Taxpayer engaged in business of generation or generation and distribution of power have the option to claim depreciation either on straight line basis or written down value basis.

2. 32(1) Depreciation in respect of:

i) Tangible assets (buildings, machinery, plant or furniture);

ii) Intangible Assets (know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature)

Depreciation shall be allowed at prescribed percentage on written down value of each block of asset (as per WDV method).

However, if asset is acquired and put to use for less than 180 days during the previous year, the deduction shall be restricted to 50% of depreciation computed above.

All assessees
3. 32(1)(iia) Additional depreciation on new plant and machinery (other than ships, aircraft, office appliances, second hand plant or machinery, etc.) shall be allowed subject to certain conditions. Additional depreciation to be allowed at 20 % of actual cost of new plant and machinery.

However, if an asset is acquired and put to use for less than 180 days during the previous year, 50% of additional depreciation shall be allowed in year of acquisition and balance 50% would be allowed in the next year.

All taxpayers engaged in:

a) manufacture or production of any article or thing; or

b) generation or transmission or distribution of power (if taxpayer not claiming depreciation on basis of straight line method)

4. Proviso to Section 32(1)(iia) Additional depreciation on new plant and machinery (other than ships, aircraft, vehicle, office appliances, second hand plant or machinery, etc.) shall be allowed subject to certain conditions. Additional depreciation to be allowed at 35 % of actual cost of new plant and machinery.

However, if an asset is acquired and put to use for less than one 180 days during the previous year, 50% of additional depreciation shall be allowed in year of acquisition and balance 50% in next year.

All taxpayers which set up an undertaking or enterprise for production or manufacture of any article or thing in any notified backward area in the state of Andhra Pradesh, Bihar, Telangana or West Bengal.

Note:

1. Manufacturing unit should be set-up on or after April 1, 2015.

2. New plant and machinery should be acquired and installed on or after April 1, 2015 but before April 1, 2020.

5. 32AC Deduction under section 32AC is available if actual cost of new plant and machinery acquired and installed by a manufacturing company after 31-3-2013 but before 1-4-2015 exceeds Rs. 25/100 Crores, as the case may be.(Subject to certain conditions) 15% of actual cost of new asset acquired and installed Company engaged in business or manufacturing or production of any article or thing
6. 32AD Investment allowance for investment in new plant and machinery (other than ships, aircraft, vehicle, office appliances, second hand plant or machinery, etc.) if manufacturing unit is set-up in notified backward area in the State of Andhra Pradesh, Bihar, Telangana or West Bengal

(subject to certain conditions)

Investment allowance to be allowed at 15 % of actual cost of new plant and machinery in the year in which such asset is installed. All taxpayers who acquire new plant and machinery for purpose of setting-up manufacturing unit in notified backward areas in the State of Andhra Pradesh, Bihar, Telangana or West Bengal

Note:

1) New asset should be acquired and installed on or after April 1, 2015 but before April 1, 2020.

2) Manufacturing unit should be set-up on or after April 1, 2015.

3) Deduction shall be allowed under Section 32AD in addition to deduction under Section 32AC if assessee fulfils the specified conditions.

7. 33AB Amount deposited in Tea/Coffee/Rubber Development Account by assessee engaged in business of growing and manufacturing tea/Coffee/Rubber in India Deduction shall be lower of following:

a) Amount deposited in account with National Bank for Agricultural and Rural Development (NABARD) or in Deposit Account of Tea Board, Coffee Board or Rubber Board in accordance with approved scheme; or

b) 40% of profits from such business before making any deduction under section 33AB and before adjusting any brought forward loss.

(Subject to certain conditions)

All assessee engaged in business of growing and manufacturing tea/Coffee/Rubber
8. 33ABA Amount deposited in Special Account with SBI/Site Restoration Account by assessee carrying on business of prospecting for, or extraction or production of, petroleum or natural gas or both in India Deduction shall be lower of following:

a) Amount deposited in Special Account with SBI/Site Restoration Account; or

b) 20% of profits from such business before making any deduction under section 33ABA and before adjusting any brought forward loss.

(Subject to certain conditions)

All assessee engaged in business of prospecting for, or extraction or production of, petroleum or natural gas or both in India
9. 35(1)(i) Revenue expenditure on scientific research pertaining to business of assessee is allowed as deduction (Subject to certain conditions). Entire amount incurred on scientific research is allowed as deduction.

Expenditure on scientific research within 3 years before commencement of business (in the nature of purchase of materials and salary of employees other than perquisite) is allowed as deduction in the year of commencement of business to the extent certified by prescribed authority.

All assessee
10. 35(1)(ii) Contribution to approved research association, university, college or other institution to be used for scientific research shall be allowed as deduction (Subject to certain conditions) 175% of sum paid to such association, university, college, or other institution is allowed as deduction.

150% of sum paid to such association, university, college or other institution is allowed as deduction (applicable from AY 2018-19)

Note:- From the AY beginning on or after the 1st day of April, 2021, the deduction shall be equal to the sum so paid.

All assessee
11. 35(1)(iia) Contribution to an approved company registered in India to be used for the purpose of scientific research is allowed as deduction (Subject to certain conditions) 125% of sum paid to the company is allowed as deduction

Entire sum paid to the company is allowed as deduction (applicable from AY 2018-19)

All assessee
12. 35(1)(iii) Contribution to approved research association, university, college or other institution with objects of undertaking statistical research or research in social sciences shall be allowed as deduction (Subject to certain conditions) 125% of sum paid to such association, university, college, or other institution is allowed as deduction

Entire sum paid to such association, university, college or other institution is allowed as deduction (applicable from AY 2018-19)

 

All assessee
13. 35(1)(iv) read with 35(2) Capital expenditure incurred during the year on scientific research relating to the business carried on by the assessee is allowed as deduction (Subject to certain conditions) Entire capital expenditure incurred on scientific research is allowed as deduction.

Capital expenditure incurred within 3 years before commencement of business is allowed as deduction in the year of commencement of business.

Note:

i. Capital expenditure excludes land and any interest in land;

ii. No depreciation shall be allowed on such assets.

All assessee
14. 35(2AA) Payment to a National Laboratory or University or an Indian Institute of Technology or a specified person is allowed as deduction.

The payment should be made with the specified direction that the sum shall be used in a scientific research undertaken under an approved programme.

200% of payment is allowed as deduction (Subject to certain conditions).

150% of payment is allowed as deduction (applicable from AY 2018-19)

Note:- From the AY beginning on or after the 1st day of April, 2021, the deduction shall be equal to the sum so paid.

All assessee
15. 35(2AB) Any expenditure incurred by a company on scientific research (including capital expenditure other than on land and building) on in-house scientific research and development facilities as approved by the prescribed authorities shall be allowed as deduction (Subject to certain conditions).

Expenditure on scientific research in relation to Drug and Pharmaceuticals shall include expenses incurred on clinical trials, obtaining approvals from authorities and for filing an application for patent.

200% of expenditure so incurred shall be as deduction.

150% of expenditure so incurred shall be allowed as deduction (applicable from AY 2018-19)

Note:

i.  Deduction shall be allowed if company enters into an agreement with the prescribed authority for co-operation in such research and development and fulfils conditions with regard to maintenance of accounts and audit thereof and furnishing of reports in such manner as may be prescribed.

ii. From the AY beginning on or after the 1st day of April, 2021, the deduction shall be equal to the expenditure so incurred.

Company engaged in business of bio-technology or in any business of manufacturing or production of eligible articles or things
16. 35AD Deduction in respect of expenditure on specified businesses, as under:

a) Setting up and operating a cold chain facility

b) Setting up and operating a warehousing facility for storage of agricultural produce

c) Building and operating, anywhere in India, a hospital with at least 100 beds for patients

d) Developing and building a housing project under a notified scheme for affordable housing

e) Production of fertilizer in India

(Subject to certain conditions)

150% of capital expenditure incurred for the purpose of business is allowed as deduction provided the specified business has commenced its operation on or after 01-04-2012.

100% of capital expenditure will be allowed to be deducted from the assessment year 2018-19 onwards

Note: If such specified businesses commence operations on or before 31-03-2012 but after prescribed dates, deduction shall be limited to 100% of capital expenditure.

All assessee
17. 35AD Deduction in respect of expenditure on specified businesses, as under:

a) Laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network;

b) Building and operating, anywhere in India, a hotel of two-star or above category;

c) Developing and building a housing project under a scheme for slum redevelopment or rehabilitation

d) Setting up and operating an inland container depot or a container freight station

e) Bee-keeping and production of honey and beeswax

f) Setting up and operating a warehousing facility for storage of sugar

g) Laying and operating a slurry pipeline for the transportation of iron ore

h) Setting up and operating a semi-conductor wafer fabrication manufacturing unit

i) Developing or maintaining and operating or developing , maintaining and operating a new infrastructure facility

(Subject to certain conditions)

100% of capital expenditure incurred for the purpose of business is allowed as deduction provided specified businesses commence operations on or after the prescribed dates. All assessee

Note: Such deduction is available to Indian company in case of following business, namely;-

(i) Business of laying and operating a cross-country natural gas or crude or petroleum oil pipeline network

(ii) Developing or maintaining and operating or developing, maintaining and operating a new infrastructure facility.

 

 

18. 35CCC Expenditure (not being cost of land/building) incurred on notified agricultural extension project for the purpose of training, educating and guiding the farmers shall be allowed as deduction, provided the expenditure to be incurred is expected to be more than Rs. 25 lakhs (Subject to certain conditions). 150% of the expenditure (Subject to certain conditions)

Note:- 100% deduction shall be allowed from the 1st day of April, 2021

All assessee
19. 35CCD Expenditure incurred by a company (not being expenditure in the nature of cost of any land or building) on any notified skill development project is allowed as deduction (Subject to certain conditions). 150% of the expenditure (Subject to certain conditions)

Note: (i) No deduction shall be allowed to a company engaged in manufacturing alcoholic spirits or tobacco products.

(ii) 100% deduction shall be allowed for the AY beginning on or after 1st day of April, 2021

Company engaged in manufacturing of any article or providing specified services
D. Under the head Capital Gain
Particulars Section 54 Section 54B Section 54D Section 54EC Section 54EE Section 54F Section 54G Section 54GA Section 54GB
Eligible taxpayer Individual and HUF Individual and HUF Any person Any person Any Person Individual and HUF Any person Any person Individual and HUF
Capital gains eligible for exemption Long-term Short-term or Long-term Short-term or Long-term Long-term Long-term Long-term Short-term or Long-term Short-term or Long-term Long-term
Capital gains arising from transfer of Residential House property Agriculture land used by taxpayer or by his parents or HUF for agriculture purposes in last 2 years before its transfer Compulsory acquisition of land or building forming part of industrial undertaking (which was used for industrial purposes for at least 2 years before its acquisition). Any long-term capital asset Any long-term capital asset Any long term asset (other than a residential house property) provided on date of transfer taxpayer does not own more than one residential house property (except the new house) Land, building, plant or machinery, in order to shift industrial undertaking from urban area to rural area. Land, building, plant or machinery, in order to shift industrial undertaking from urban area to SEZ. Residential property (house or a plot of land)

Note:

Provisions of this section shall not apply to any transfer of residential property made after March 31, 2017. However, in case of an investment in eligible start-up, the residential property can be transferred up to March 31, 2019.

Assets to be acquired for exemption One residential house property Agricultural land (may be in urban area or rural area) Land or building for shifting or reestablishing said industrial undertaking Bond of NHAI or REC, etc. Units of such fund as may be notified by Central Government to finance start-ups One residential house property Land, building, plant or machinery, in order to shift industrial undertaking to rural area. Land, building, plant or machinery, in order to shift industrial undertaking to SEZ. Subscription in equity shares of an eligible company.

Note:

1. W.e.f. April 1, 2017, eligible start-up is also included in definition of eligible company.

2. The eligible company should utilize the amount of subscription for purchase of new assets (i.e., plant and machinery except vehicle, office appliances, computer or computer software etc.). However, In the case of eligible startup, the new asset shall include computers or computer software.

Time limit for acquiring the new assets Purchase: within 1 year before or 2 years after date of transfer

Construction: within 3 years after date of transfer

Within 2 years after date of transfer Within 3 years from date of receipt of compensation Within 6 months from date of transfer Within 6 months after the date of transfer of original asset Purchase: within 1 year before or within 2 years after date of transfer

Construction: within 3 years after date of transfer

within 1 year before or 3 years after date of transfer Within 1 year before or within 3 years after date of transfer Investment by the assessee – Before due date for furnishing of return under Sec. 139(1).

Investment by the company – within 1 year from date of subscription.

Exemption Amount Investment in new assets or capital gain, whichever is lower Investment in agricultural land or capital gain, whichever is lower Investment in new assets or capital gain, whichever is lower Investment in new assets or capital gains, whichever is lower, however, subject to Rs. 50 lakhs in a financial year. Investment in new assets or capital gains, whichever is lower, however, subject to Rs. 50 lakhs. Investment in new assets X capital gain/net consideration Investment in new assets or capital gain, whichever is lower Investment in new assets or capital gain, whichever is lower Investment in new assets X capital gain/net consideration
Withdrawal of exemption If new asset is transferred within 3 years of its acquisition If new asset is transferred within 3 years of its acquisition If new asset is transferred within 3 years of its acquisition If new asset is transferred or it is converted into money or a loan is taken on its security

within 3 years of its acquisition

If new asset is transferred within a period of 3 years from the date of its acquisition.

Note:

Where assessee takes loans or advance on security of such specified asset, he shall be deemed to have transferred such asset on the date on which such loan or advance is taken.

a) If new asset is transferred within 3 years of acquisition,

b) if another residential house is purchased within 2 years of transfer of original asset;

c) if another house is constructed within 3 years of transfer of original asset

If new asset is transferred within 3 years of acquisition If new asset is transferred within 3 years of acquisition If equity shares in company or new asset acquired by company is sold or transferred within a period of 5 years from date of acquisition.
Deposit in Capital gains deposit scheme before due date under Sec. 139(1) Yes Yes Yes No No Yes Yes Yes Yes

Capital Gain Account Scheme 1988

  1. a) The scheme is open to all taxpayers, who wish to claim exemption under Sections 54, 54B, 54D, 54F, 54G or 54GB.
  2. b) If taxpayer could not invest the capital gains to acquire new asset before due date of furnishing of return, the capital gains can be deposited before due date for furnishing of return of income in deposit account in any branch of a nationalized bank in accordance with Capital Gain Account Scheme 1988.
E. Under the head Income from other sources
1. 56(2)(vii) Any sum of money or immovable property or movable property received without consideration or for inadequate consideration from a relative or member of HUF (subject to certain conditions and circumstances). The whole amount received from specified relatives or in specified circumstances shall not be included in taxable income. Individual and HUF
2. 57(iia) Standard Deduction for family pension 33.33% of Family Pension subject to maximum of Rs. 15,000 Individual

 

 

[As amended by Finance Act, 2016]

 

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