INCOME TAX
INSTRUCTION NO. 5158/1993
Dated: September 24, 1993
Section(s) Referred: 10(14) ,17(2)
Statute: Income - Tax Act, 1961
Section 10(14) of the Income-tax Act provides for exemption from tax in respect of allowances received by employees from their employer. The provision has been substantially recast by the Direct Tax Laws (amendment) Act, 1987. The amended provisions have come into effect from 1.4.1989.
2. Under Section 10(14)(i), any special allowance or benefit, which is not separately taxable as a perquisite u/s.17(2), and which is notified by the Central Government in this regard is entitled to tax exemption. The exemption is allowable only to the extent to which the employee has actually incurred expenses for the purposes of the performance of his duties.
3. As of date, the only allowances notified u/s.10(14)(i) relevant in the case of pilots and other crew of Airlines are the following:-
(a) Any allowance granted to an employee to meet the cost of travel on tour or on transfer.
(b) Any allowance whether on tour or for period of journey in connection with transfer, granted to meet the ordinary daily charges incurred by the employee on account of his absence from normal place of duty.
(c) Any allowance granted to meet the expenditure incurred on conveyance in the performance of duties.
(d) Any allowance granted to meet the expenditure incurred in the purchase or maintenance of uniform for wear in the performance of duties.
4. Under Section 10(14)(ii), any allowance to meet the personal expenditure of an employee at a place where he works or resides or to compensate him for the increased cost of living is exempt. The exemption must be formally notified and it is available accordingly to the extent specified in the notification.
5. One of the allowances notified u/s.10(14)(ii) is in regard to sum granted to an employee working in any transport system to meet his personal expenditure during his duty performed in the course of running such transport from one place to another. The exemption applies to the whole of India and is available upto 70% of the allowance upto a maximum of Rs. 1,000/- per month. The ceiling of Rs. 1,000 has been revised to Rs. 3,000 w.e.f. 1-7-1992. No other allowance relatable only to employees working in any transport system has been notified u/s.10(14)(ii).
6. The claims for exemptions made by pilots and other crew of airlines, whether in public or private sectors, should be processed in the light of the above provisions. If exemption is sought for any allowance, it is to be clearly affirmed by the employees that the allowances have been expended for the purpose for which they have been given and, in case the evidence is required to be produced, such evidence should be furnished to the assessing authorities. The employers, in turn, will have to indicate in the salary certificate full details of all such special allowances which are paid to the employees, whether claimed to be exempt or not.
7. You may apprise employers of the legal position brought out here so that correct tax is deducted at source in accordance with the provisions of law. The Assessing Officers may also be informed of the contents of this letter so as to ensure that the exemptions u/s.10(14) are allowed strictly in accordance with the law.
8. Further, the relevant penal provisions and provisions relating to prosecutions regarding tax deduction at source may be brought to the notice of the employers and the employees.
F.No. 133/156/93-TPL