Allowance | Meaning and Definition

What is the allowance in salary?

An allowance is a fixed amount of money paid by employers to their employees periodically. In other words, it is a sum of money given to someone regularly, typically weekly or monthly, for a specific purpose. If you want to define allowance specifically, here is an example – employers pay employees overtime above and beyond their basic salary when they work more hours.

What is Salary in Income tax?

Salary is defined as per Section 17(1) of the Income Tax Act that it is anything paid to an employee in exchange for their work – whether it’s an hourly wage, annual salary, commission, tips, bonuses, or benefits. In addition to that, there are multiple allowances that comes under salary. 

Different Types of Allowances

Salary allowances are categorized into three such as taxables, non-taxable, and partially taxable allowances: 

Taxables Non-taxablePartially taxable

Entertainment allowance

Tiffin/meals allowance

Overtime allowance

Dearness allowance

Cash allowance

Non-practicing allowance

City compensatory allowance

Medical allowance

Interim allowance

Other allowance in salary

 HRA Leave Travel Allowance

Children Education Allowance

Hostel Expenditure Allowance

Books and periodicals allowance

Conveyance allowance under section 10 14 ii of the income tax act

Entertainment allowance – deduction under section 16 ii

Other allowance


Conveyance allowance in salary

Books and Periodicals allowance


Gifts in kind

Recreational and medical facilities

Allowance for UN employees

Sumptuary allowance

Compensatory allowance

Conveyance allowance meaning:

A conveyance allowance is a type of benefit that employers sometimes offer to employees to help cover transportation costs.

Sumptuary allowance meaning:

A sumptuary allowance is an extra amount of money given to employees to help offset the costs of necessities, such as food and housing. 

What is entertainment allowance?

The entertainment allowance in salary is a provision in some employment contracts that allows the employer to pay for certain entertainment expenses incurred by the employee. 

HRA allowance meaning:

It is an allowance given by the employer to the employee for housing. 

Is conveyance allowance taxable?

It is taxable only if it exceeds the exemption limit.

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