Filing ITR for Army Official: What extra Income Tax Allowances are Available for Tax Saving

Allowance is the extra amount paid to an employee apart from their salary to cover some particular expenses. As per the Income Tax Act, 1961, allowances are included in the salary of an individual and are subject to taxation under the head “Income from Salaries“. Some of the allowances are fully taxable, some are partially taxable, while some are fully exempt from tax. Some of the common allowances include House Rent Allowance (HRA), Dearness Allowance (DA), Transport Allowance, etc.

Similarly, the personnel of the Armed Forces are given different allowances as they work in dangerous, unpleasant and difficult conditions. These allowances are usually fixed amounts and do not depend on how much money the personnel actually spend. As per the Income Tax Act, these allowances are tax-free, but only up to a certain limit. Let us understand the types of allowances given to the armed forces and their exemption limit under section 10(14)

Allowances Given to Armed Forces

Special Compensatory Allowance (Hilly Areas): The exemption limit ranges between Rs. 300 per month and Rs. 7,000 per month. The exemption of special compensatory allowance is allowed to Individual salaried employees.

Border Area Allowance or Remote Locality Allowance or Disturbed Area Allowance or Difficult Area Allowance: The exemption limit ranges between Rs 200 per month and Rs 1,300 per month. The exemption of this allowance is allowed to Individual salaried employees.

Tribal Area Allowance or Special Compensatory or Scheduled Area or Agency Area Allowance: The exemption limit is up to Rs. 200 per month. The exemption is available to Individual salaried employees.

Compensatory Field Area Allowance: The exemption limit is up to Rs. 2,600 per month. The exemption is available to Individual salaried employees.

Compensatory Modified Field Area Allowance: The exemption limit is up to Rs. 1,000 per month. The exemption is allowed to individual salaried employees.

Counter Insurgency Allowance: The exemption is allowed to members of the armed forces operating in areas away from their permanent locations. The exemption limit is up to Rs. 3,900 per month.

Underground Allowance: The exemption limit is up to Rs. 800 per month. The exemption is allowed to individual salaried employees working in unpleasant and unnatural climates in underground mines.

High Altitude Allowance: The exemption limit is up to Rs. 1,060 per month for altitudes between 9,000 to 15,000 feet, and up to Rs. 1,600 per month for altitudes above 15,000 feet. The exemption is allowed to individual members of the armed forces working in high-altitude areas.

Special Compensatory Highly Active Field Area Allowance: The exemption limit is up to Rs. 4,200 per month. The exemption is allowed to individual members of the armed forces.

Island Duty Allowance: The exemption limit is up to Rs. 3,250 per month. The exemption is allowed to individual members of the armed forces posted in the Andaman and Nicobar Islands or the Lakshadweep group of islands.