Allowances which are not taxable

Costs met by your employer, if you are about to leave your employment, or have left within the previous year, to enable you to attend certain courses of retraining intended to help you get another job. If you have not left by the time you start the course, you must leave within two years of finishing it for the exemption to apply. The exemption is withdrawn if you are re-employed by the same employer in the two years following the end of the course.

The exemption is only available if you have been employed by your employer for at least two years up to the time you begin the course, or at the time the employment ceased. This exemption covers the costs borne by your employer of work-related training within the whole range of practical or theoretical skills and competencies you are reasonably likely to need in your present or likely future jobs with your employer.

The exemption extends to:. All the ways in which training can be delivered are covered, including full-time and part-time training, internal training courses run by your employer, courses that are run externally or by a third party, and courses that comprise any mixture of these. Training, or training-related travel and subsistence, which is provided as entertainment, recreation, reward or an inducement, remains taxable.

Any asset provided to you or for your use is also taxable unless the asset is provided or used purely for training, or for training coupled only with use in the performance of the duties of your office or employment.

Long service awards made to directors and employees as testimonials to mark long service where the service is not less than 20 years and no similar award has been made to the same employee within the previous 10 years. An encouragement award is one that is made for a suggestion that has some special merit or reflects praiseworthy effort on the part of the person making the suggestion. The cost of providing the electricity is only free from tax if the employer pays for all the electricity directly.

If, instead, the employer reimburses the employee and that includes the cost for any private mileage, there will be a charge to tax and NIC on the whole amounts of the reimbursement although the employee will be able to claim tax relief for the business mileage.

Certain gifts from third parties are not taxable if all these conditions are satisfied:. The cost of transport, for up to 60 journeys in each tax year, your employer provides to take you home if:. The benefit of travel between home and work in a bus or minibus that your employer provides may be non-taxable. The following conditions must be met:. Or if your employer pays a subsidy to a public bus service so that you travel at a reduced or no cost on that route, provided that the service is available to all employees.

Recognising the difficulty of bringing employees together safely in the midst of the coronavirus pandemic, HMRC have confirmed that the exemption will apply to the costs associated with virtual parties in the same way that it would for traditionally held parties.

The exemption applies to sports facilities generally available to all employees and members of their families and households. Certain elements of travelling and subsistence allowances paid under Working Rule Agreements to some employees in the construction and allied industries are paid free of tax under an agreement with HMRC.

Any allowances or part of allowances covered by this agreement will not be shown on form P11D and should not be included on your tax return. Most counselling services provided in connection with termination of employment are exempt from tax.

There are detailed conditions to be satisfied. Welfare counselling made available to all employees generally on similar terms is exempt from tax. For this purpose, welfare counselling does not include:. There is no charge to tax on one mobile phone provided to you, or any line rental or the cost of any private calls for that phone paid for by your employer. One mobile phone may consist of two connections, for example, two SIM cards, to the same number, one in a handset and another in a hands-free phone in a car.

However, two connections to two different numbers represent two mobile phones. A mobile phone provided to a member of your family or household is taxable in all circumstances, unless the family or household member is provided with the phone as an employee in their own right.

If an employer provides a mobile phone to you solely for business use, and private use is not significant, there is no charge to tax. Consequently, it is possible for an employer to provide two, or more, mobile phones without creating a tax charge, if one or more is provided solely for business use — and private use is not significant — and only one is provided for private use.

But if two mobile phones are provided for private use, or for mixed private and business use, only one is exempt. It is up to you and your employer to decide which one is exempt and which one is chargeable as a benefit. HMRC accept that the provision of one such device to an employee can be exempt from a benefit in kind charge even where there is private use.

This exemption does not extend to other devices such as iPads, PDAs and tablets. If your employer lends or hires bicycles or cycling safety equipment to their employees, the exemption applies if:.

The bicycles or equipment are available to all employees — this does not mean that every employee has to be provided with a bicycle or equipment, just that the offer of cycles or equipment is open to all employees if they wish to take it up; and. Other use of the cycle, for instance pleasure use or use by members of your family will not disqualify the exemption provided that the other use is not the main use of the bicycle.

You are not expected to keep detailed records of time spent cycling or miles travelled for the purpose of this exemption. If ownership of the bicycle is transferred to you after a period of use during which the exemption applied, the transfer is a taxable benefit and the cost of that benefit is the market value of the bicycle at the date of transfer.

The exemption from tax and NIC for loaned or hired cycles only applies where there is no transfer of the property in the cycle or equipment in question. This means that the exemption ceases to apply if ownership is transferred to you. Similarly, the exemption does not apply if any agreement builds in from the outset an automatic transfer of ownership to you at the end of the hire period.

Some employees are paid an allowance for using their own bicycle for business travel. Their employer might pay them per mile to do so, for example your employer might pay you 10p for every business mile that you cycle. You can receive up to a maximum amount per mile without having to pay any tax. The AMAP rate for using your own bicycle is 20p for each business mile.

If your employer pays you 30p per mile, say, you have to pay tax and NIC on the extra 10p a mile you get above the approved rate. If you get paid less than the approved rate then you can claim tax relief on the difference, assuming that your income is high enough that you pay tax.

There is more information on claiming this on our What if I use my own car for business purposes? If your employer sells you goods, for example, unsold bakery products, at a discount, provided the amount you pay is at least the cost incurred by your employer in making the goods, there is no taxable benefit.

See our page What if I use my own car for business purposes? If you work from home, your employer can pay you a home working allowance to reimburse you for additional household expenses, such as gas and electricity. There is more information on our page What if I incur expenses in relation to my job? Although this is aimed at employers, it will also be useful to employees.

There is a quick guide to employment benefits aimed at employees on GOV. Skip to main content. Home Tax Guides Employment Employment benefits and expenses What payments and benefits are non-taxable? What payments and benefits are non-taxable? Updated on 30 July Benefits and expenses may be tax free for a number of reasons: a PAYE settlement agreement PSA is in place — under a PSA, your employer settles, on your behalf, your income tax and NIC due to HMRC on certain types of benefits and expenses payments; or Statutory exemptions and Extra-Statutory Concessions — the benefits or expenses payments are covered by a concession or exemption.

You do not have to pay tax or NIC on benefits and expenses covered by a PSA , and if you complete a tax return, you do not need to include them there. What are the most common exemptions and concessions in relation to benefits provided by your employer? Qualifying business expenses Since 6 April , there is an exemption for qualifying business expenses paid or reimbursed by employers.

Employer contributions into a pension Employer contributions to an employee's pension scheme are not taxable on the employee provided they are within certain limits.

Medical treatment abroad The cost of necessary medical treatment abroad paid for by your employer, or paid by you and reimbursed to you by your employer, where you fall ill or suffer injury while away from the United Kingdom in the performance of your duties.

Health screening and medical check-ups Expenses incurred in providing you with a maximum of one health screening assessment and one medical check-up in any year. Certain living accommodation The cost of living accommodation, also known as job-related accommodation, provided for you if: it is necessary for the proper performance of your duties that you reside in the accommodation, but see note a below; or the accommodation is provided so that you can perform your duties in a materially better way and you are in the kind of employment in which it is customary for employers in that business to provide accommodation, but see note a below; or there is a threat to your security and special security arrangements are in force and you reside in the accommodation as part of those arrangements.

Engine Capacity upto cc value of perquisite. Engine Capacity above cc value of perquisite. Where maintenances and running expenses including remuneration of the chauffeur are met or reimbursed by the employer. If car is used exclusively for the personal purposes of the employee or any member of his household. The motor car is used partly in the performance of duties and partly for personal purposes of the employee or any member of his household.

Expenditure incurred by the employer i. The reimbursement is for the use of the vehicle wholly and exclusively for official purposes. The reimbursement is for the use of the vehicle exclusively for the personal purposes of the employee or any member of his household. Actual expenditure incurred by the employer minus amount recovered from the employee.

The reimbursement is for the use of the vehicle partly for official purposes and partly for personal purposes of the employee or any member of his household. Actual expenditure incurred by the employer minus Rs. Where the employee owns any other automotive conveyance and actual running and maintenance charges are met or reimbursed by the employer.

Reimbursement for the use of the vehicle wholly and exclusively for official purposes;. Reimbursement for the use of vehicle partly for official purposes and partly for personal purposes of the employee. Cost of such education in similar school less Rs.

Amount incurred less amount recovered from employee an exemption of Rs. Tax treatment in respect of contributions made to and payment from various provident funds are summarized in the table given below:.

Deduction under section 80C on employees contribution. Payment from recognized provident fund shall be exempt in the hands of employees in following circumstances:. No exemption shall be available for the interest income accrued during the previous year in the recognised and statutory provident fund to the extent it relates to the contribution made by the employees over Rs.

However, if an employee is contributing to the fund but there is no contribution to such fund by the employer, then the interest income accrued during the previous year shall be taxable to the extent it relates to the contribution made by the employee to that fund in excess of Rs. Readers are requested to please check the relevant document from below link:.

Section Particulars Benefits A. Allowances 1. Fully Taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent ii. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance Subject to certain conditions and locations Rs. Perquisites 1. If House Property is owned by the employer: i. If House Property is taken on lease or rent by the employer, the perquisite value shall be : i. Value of any perquisite [under section 17 2 ] ii.

Benefits received at the time of retirement like gratuity, pension etc. Note: 1 Rent free accommodation is not chargeable to tax if provided to an employee working at mining site or an on-shore oil exploration site, etc. Note: The value so determined shall be reduced by the amount of rent, if any, paid by the employee 4. Amount paid by the employer, if purchased by the employer from outside agency Note: i. Taxable in case of specified employees only [ See note 4 ] 8. Note: The Finance Act, has deferred the taxation of perquisite in case of start-ups from date of allotment to the earliest of the following three dates: 1.

Expiry of 48 months from the end of the relevant assessment year; 2. Sale of such shares by the employees; 3. Date on which employee ceases to be employee of the start-up. Find out rate of interest charged by the SBI as on the first day of relevant previous year in respect of loan for the same purpose advanced by it; 3. Calculate interest for each month of the previous year on the outstanding amount mentioned in point 1 at the rate of interest given in point 2 4.

Interest actually recovered, if any, from employee 5. The balance amount point 3-point 4 is taxable value of perquisite Nothing is taxable if: a Loan in aggregate does not exceed Rs 20, b Loan is provided for treatment of specified diseases Rule 3A like neurological diseases, Cancer, AIDS, Chronic renal failure, Hemophilia specified diseases. The exemption shall be limited to fare for going anywhere in India along with family twice in a block of four years: i.

Exemption limit where journey is performed by Air - Air fare of economy class in the National Carrier by the shortest route or the amount spent, whichever is less ii.

Exemption limit where journey is performed by Rail - Air-conditioned first class rail fare by the shortest route or the amount spent, whichever is less iii. Exemption limit if places of origin of journey and destination are connected by rail but the journey is performed by any other mode of transport - Air-conditioned first class rail fare by the shortest route or the amount spent, whichever is less iv.

Exemption limit where the places of origin of journey and destination are not connected by rail: a. Where a recognized public transport system exists - First Class or deluxe class fare by the shortest route or the amount spent, whichever is less b. Where no recognized public transport system exists - Air conditioned first class rail fare by shortest route or the amount spent, whichever is less Notes : i. Two journeys in a block of 4 calendar years is exempt ii.

Taxable only in case of Specified Employees [ See note 4 ] Proviso to section 17 2 Medical facilities in India 1 Expense incurred or reimbursed by the employer for the medical treatment of the employee or his family spouse and children, dependent - parents, brothers and sisters in any of the following hospital is not chargeable to tax in the hands of the employee: a Hospital maintained by the employer.

Proviso to section 17 2 Medical facilities outside India Any expenditure incurred or reimbursed by the employer for medical treatment of the employee or his family member outside India is exempt to the extent of following subject to certain condition : a Expenses on medical treatment - exempt to the extent permitted by RBI. Deduction from salary 1. Retirement Benefits a Leave Encashment 1. Non taxable allowances are those allowances that are a part of an individual's salary which are fully exempted from taxes.

Here is the list of allowances that are totally non -taxable. Some of the partially taxable allowances are mentioned below. Nirmala Sitharaman on 1st Feb As per the Income Tax Act, allowances are the monetary benefits given by the employer to the employee over and above the basic salary for meeting various expenses. Monthly Allowance is the monetary benefit that the employees get for meeting fixed monthly expenses like electricity bill, broadband, etc.

The taxable income is calculated by adding income from all the sources an individual has earned in the financial year and deducting the applicable exemptions and deductions from the gross total income.

When you adjust the gross income with the applicable exemptions and deductions, then what you get is the Total or Taxable income. It is the income on which the income tax has to be calculated. The taxable income of salaried employees can be calculated by adding the income from salary, house property and other sources and deducting the applicable exemptions and deductions. If you are an Indian resident, then any income earned by you anywhere in the world is taxable in India, and it has to be treated like just any other income for the purpose of calculating Income Tax.

However, in the case of NRIs, the income received in India is taxable. Best Loan Against Property Offers starting 6. Collateral Free Business Loan Rates starting at Read Union Budget Highlights New. Financial Year - - Gender Male Female. Date of Birth. City or Pincode. What are you looking for? Get Details. Looking for a Loan? Apply Now. Looking for an investment?

What is Allowance? Calculate Income Tax. Calculate Your Tax. Apply For Loan Online. Taxable Income Taxable allowances are allowances that are treated as a part of salary and are not either fully or partially exempted under any sections of Income Tax. Some of the popular allowances that belong to this category are: Entertainment Allowance Entertainment allowance is the amount of money given to an employee to make payments towards hospitality of their customers for drinks, meals, business outings, client meetings, hotels and more.

The allowance is completely taxable for all private sector employees. Overtime Allowance This allowance is received by employees who tend to work more than the operational hours decided by the company.