“Special Allowance”

What is Special Allowance?

Special Allowance is a component of an employee’s salary structure in india and is provided by the employer to meet specific needs or expenses related to the job or the employee’s role. It is usually a fixed amount and can vary from company to company, depending on their policies and the employee’s position.

Special Allowance Benefit:

The exemption for Special Allowance depends on the nature of the Compensatory Allowance and the applicable tax laws in a particular region. It’s essential to check the tax regulations of the specific country or region to determine the exemption limits for this.

FAQs

What if Special Allowance is more than Basic Salary?

If the Special Allowance exceeds the Basic Salary, it might imply that the employer is trying to structure the compensation to reduce tax liabilities. Tax authorities may reclassify it as salary and tax it accordingly.

Can Special Allowance be higher than Basic Salary?

Yes, It can be higher than Basic Salary. However, this structure might draw attention from tax authorities and could have tax implications.

What is the difference between Special Allowance and Dearness Allowance?

Special Allowance is a flexible part of the salary structure provided by the employer for specific needs, whereas Dearness Allowance (DA) is an allowance to mitigate the impact of inflation on employees’ purchasing power and is linked to the cost of living index of a specific region. DA is usually a percentage of the Basic Salary.
Also, See: Non Taxable Allowance | Salary Components in India