What are allowances?

Ans. Allowances are fixed periodic amounts, apart from salary, which are paid by an employer for the purpose of meeting some particular requirements of the employee.  E.g., Tiffin allowance, transport allowance, uniform allowance, etc.

There are generally three types of allowances for the purpose of the Income-tax Act - taxable allowances, fully exempted allowances and partially exempted allowances.

Perquisites are benefits received by a person as a result of his/her official position and are over and above the salary or wages. These perquisites can be taxable or non-taxable depending upon their nature.  Uniform allowance is exempt to the extent of expenditure incurred for official purposes u/s 10(14).