Daily allowance taxable or exempt?


Is daily allowance taxable or tax exempt?


They are taxable if not claimed against the actual bills.

Example: An allowance like petrol - is submitted against the actual bills or exempted by Org.

But allowances like - Telephone which is paid need to be submitted proof at the end of the year for claiming exemptions.


Daily allowance is provided to employees to meet the daily expenses incurred when on tour or for the period of a transfer in the job. The Income Tax Act clearly states that daily allowance an employee receives is not taxable if these conditions are met:

  • It is a special allowance granted solely for performing duties;
  • Provided on tour and separate from the normal place of duty; and
  • Expenses were actually incurred.
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