Allowability of Exemption under Section 10(14)(i) under the New Tax Regime

[vaibhav agrawal]

Is the exemption under Section 10(14)(i) of the Income-tax Act, 1961 allowable under the new tax regime?

[Sanjeev Agarwal]

Exemption under Section 10(14)(i) under the New Tax Regime

No. Under Section 115BAC (new tax regime), the exemption under Section 10(14)(i) is generally not available. However, an exception is provided for certain prescribed allowances notified by the Central Government. The conditions of Section 115BAC specifically restrict the claim of exemption under Section 10(14), except for such prescribed allowances.

Allowances that continue to be exempt under the new regime include:

• Travelling allowance for tour or transfer.
• Daily allowance during official tour.
• Conveyance allowance incurred wholly in the performance of official duties (where free conveyance is not provided).
• Allowance to meet ordinary daily charges while away from the normal place of duty.
• Transport allowance granted to a divyang (disabled) employee.

These allowances continue because they are intended to reimburse expenses incurred in the discharge of official duties rather than provide a personal tax benefit.

Allowances not exempt under the new regime include:

• House Rent Allowance (HRA).
• Children Education Allowance.
• Hostel Expenditure Allowance.
• Most special, academic, helper, research, and similar allowances unless specifically covered by the prescribed exceptions.

Practical implication:

For employees opting for the new tax regime, employers should compute salary income without allowing exemption for most allowances under Section 10(14)(i), except the prescribed duty-related allowances. The standard deduction and deductions specifically permitted under Section 115BAC, such as employer's contribution to NPS under Section 80CCD(2), continue to be available.

AI Summary

Allowance exemption under the new tax regime is limited to notified duty-related allowances, while most salary allowances remain taxable.
Exemption under Section 10(14)(i) is generally not available under the new tax regime under Section 115BAC, except for specified allowances notified by the Central Government. Duty-related allowances such as travelling allowance for tour or transfer, daily allowance on official tour, conveyance allowance for official duties, ordinary daily charges away from the normal place of duty, and transport allowance for a divyang employee continue to be exempt, while HRA and most other allowances do not.