Daily allowance taxable or exempt?

Hi,

Is daily allowance taxable or tax exempt?

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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.

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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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