Non Taxable Allowance | Meaning and Definition

What are non-taxable allowances?

Non-taxable allowances are an additional amount of money given to employees on their regular salary. This financial advantage can cover expenses related to their jobs, such as travel or accommodation costs. The allowance is not considered taxable income, so the employee does not have to pay taxes. 

What are fully exempt allowances?

Fully exempt allowances are a type of allowance that can be claimed without providing any information about the expenses being claimed.

Some allowances are fully exempt – the first is for certain disability-related expenses, and the second is for travel costs related to caring for a dependent.

The disability-related expenses which can be claimed as a fully exempt allowance include:

  •   Special equipment or furniture.
  •   Adaptations to a home or car.
  •   Repair or replacement of aids or appliances.
  •   Help with personal care or transport.

The travel costs, which can be claimed as a fully exempt allowance, relate to journeys made specifically to care for a dependent.

List of fully non-taxable allowances

  •   Allowances to Government Employees Abroad
  •   Allowances to UNO Employees
  •   Allowances to Judges of HC & SC
  •   Compensatory Allowances

Benefits of non-taxable allowances:

There are several benefits to receiving a non-taxable allowance. Here are some of them:

  •   You can use the money to cover essential expenses without worrying about being taxed on it. This can help reduce your overall tax burden and free up more money to save or spend elsewhere.
  •   Non-taxable allowances can help you stay financially afloat during lean times or periods of financial difficulty. Because the funds are not subject to taxation, you can use them all to cover necessary costs without worrying about jeopardizing your financial stability.
  •   There may be some government benefits or programs you qualify for that are only available if your income falls below a certain threshold.
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