ALLOWANCE WHICH ARE FULLY EXEMPT

Allowances which are fully exempt

(1) Allowances granted to Government employees outside India [Section 10(7)]

Allowances or perquisites paid or allowed as such outside India by the Government to a citizen
of India for services rendered outside India are exempt from tax.

Students may remember that in such cases under section 9(1)(iii), the income chargeable under
the head ‘Salaries’ is deemed to accrue in India. The residential status of the recipient will,
however, not affect this exemption.

(2) Allowance to High Court Judges

Any allowance paid to a Judge of a High Court under section 22A(2) of the High Court Judges
(Conditions of Service) Act, 1954 is not taxable.

(3) Sumptuary allowance granted to High Court or Supreme Court Judges
Sumptuary allowance given to High Court Judges under section 22C of the High Court Judges
(Conditions of Service) Act, 1954 and Supreme Court Judges under section 23B of the
Supreme Court Judges (Conditions of Service) Act, 1958 is not chargeable to tax.

(4) Allowance paid by the United Nations Organisation (UNO)
Allowance paid by the UNO to its employees is not taxable by virtue of section 2 of the United
Nations (Privileges and Immunities) Act, 1947.

(5) Compensatory allowance received by a judge

Compensatory allowance received by judge under Article 222(2) of the Constitution is not
taxable since it is neither salary not perquisite—Bishamber Dayalv. CIT [1976] 103 ITR 813
(MP).

Exemption of specified allowances and perquisites paid to Chairman or a retired Chairman or any other member or retired member of the UPSC [Section 10(45)]
(i) Under the Income-tax Act, 1961, perquisites and allowances received by an employee are
taxable under the head “Salaries” unless they are specifically exempted.

(ii) Section 10(45) exempts specified allowances and perquisites received by Chairman or
any other member, including retired Chairman/member, of the Union Public Service
Commission (UPSC).

(iii) The exemption would be available in respect of such allowances and perquisites as may
be notified by the Central Government in this behalf.

(iv) Accordingly, the Central Government has notified the following allowances and
perquisites for serving Chairman and members of UPSC, for the purpose of exemption
under section 10(45) -

  (1) the value of rent free official residence,

  (2) the value of conveyance facilities including transport allowance,

  (3) the sumptuary allowance and

  (4) the value of leave travel concession.

In case of retired Chairman and retired members of UPSC, the following have been notified for exemption under section 10(45):

(i) a sum of maximum ` 14,000 per month for defraying the service of an orderly and for
meeting expenses incurred towards secretarial assistance on contract basis.

(ii) the value of a residential telephone free of cost and the number of free calls to the extent
of ` 1,500 pm (over and above free calls per month allowed by the telephone authorities)

Note – Tax exemption is also available in respect of certain specified perquisites enjoyed by Chief Election Commissioner/Election  Commissioner and judges of Supreme Court on account of the enabling provisions in the respective Acts which govern their service conditions.