Allowance

What is Employee Allowance?

Allowance is the fixed amount paid to employees, other than basic salary. It is covering expenses for different kinds of activities such as renting a house, traveling to the workplace, traveling outside, eating food, etc.

Salary allowances are categorized into three taxable, non-taxable, and partially taxable. Payment for all allowances is included within the CTC of employees.

• Non-taxable allowances are paid by sumptuary, UNO, etc.
• Partially taxable allowances – medical allowance, house rent allowance, etc.
• Taxable allowances- dearness allowance, overtime allowance, etc.

The inclusion of non-taxable allowances and partly taxable allowances in salary help employees for saving tax and that’s why the company prefers to add these allowances to the CTC of employees. It is given to someone regularly, weekly or monthly, for a selected purpose.

Also, See: Conveyance allowance