Employee Allowances

Tax Glossary Definition

Employee Allowances

The specific payments made by employers to cover certain expenses of employees, such as rent, travel, or transportation. Depending on the purpose and legal provisions, these allowances may be either fully taxable, partially exempt, or fully exempt.

Example: If an employee receives a House Rent Allowance (HRA) of ₹2 lakh, a portion of it may be exempt from tax based on rent paid and salary components.

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