Section 10(14) of the Income-tax Act, 1961 exempts two kinds of allowances paid to salaried employees: allowances that cover expenses of doing the job, and a list of personal allowances with fixed monthly limits. Many other exemptions that people associate with it, such as leave encashment, LTA, gratuity and commuted pension, sit in different clauses of Section 10 with their own rules.
This guide covers which allowances qualify for AY 2026-27, the limits, what changes under the new tax regime, and how the exemption reaches your ITR.
Part 1: Section 10(14)(i), Allowances for Official Duties
These are exempt to the extent actually spent for the purpose (Rule 2BB(1)). Any unspent part is taxable salary.
| Allowance | What it covers |
|---|---|
| Travel allowance on tour or transfer | Travel cost on tour or on transfer, including packing and transport of personal effects |
| Daily allowance | Ordinary daily charges while on tour or away from the normal place of duty |
| Conveyance allowance | Travel in the performance of official duties (not home to office commuting) |
| Helper allowance | Helper engaged for official duties |
| Academic, research or training allowance | Paid by educational and research institutions for academic or research work |
| Uniform allowance | Purchase and maintenance of a uniform worn on duty |
Example: An employee transferred from Delhi to Mumbai receives a relocation allowance of Rs 3,00,000 and spends Rs 1,80,000 on travel, packers and transport of household goods. Rs 1,80,000 is exempt; the remaining Rs 1,20,000 is taxable salary.
Part 2: Section 10(14)(ii), Personal Allowances With Fixed Limits
These are exempt up to the limits in Rule 2BB(2), whether or not you spend the money. Key limits for FY 2025-26:
| Allowance | Exempt limit |
|---|---|
| Children education allowance | Rs 100 a month per child, up to 2 children |
| Hostel expenditure allowance | Rs 300 a month per child, up to 2 children |
| Transport allowance for an employee who is blind, deaf and dumb, or orthopedically handicapped | Rs 3,200 a month |
| Allowance to employees of a transport business for personal expenses while running the transport | 70% of the allowance, up to Rs 10,000 a month |
| Underground allowance (mines) | Rs 800 a month |
Rule 2BB(2) also lists special compensatory allowances for hilly, border, remote, tribal and high-altitude areas and for certain armed forces postings, each with its own monthly limit. The Income-tax Rules 2026 revise several of these limits for tax year 2026-27, so confirm the current figure with your employer.
What Survives Under the New Tax Regime
Section 115BAC removes most exemptions, but these remain available under the new regime:
- Travel allowance on tour or transfer
- Daily allowance on tour
- Conveyance allowance for official duties
- Transport allowance for employees with the specified disabilities
Children education, hostel and the other personal allowances in Part 2 are taxable under the new regime.
Related Exemptions That Are Not Section 10(14)
| Receipt | Section | Rule in brief |
|---|---|---|
| Leave travel allowance | 10(5) | Domestic travel fare only, two journeys in a four calendar-year block (current block 2026 to 2029); old regime only |
| Leave encashment | 10(10AA) | Exempt only on retirement or leaving; non-government limit Rs 25 lakh in a lifetime; encashment during service is fully taxable |
| Gratuity | 10(10) | Non-government limit Rs 20 lakh in a lifetime |
| Commuted pension | 10(10A) | Fully exempt for government employees; for others, one-third of full commuted value if gratuity is also received, otherwise one-half |
| House rent allowance | 10(13A) | Lowest of actual HRA, rent minus 10% of salary, and 50% or 40% of salary; old regime only |
How the Exemption Reaches Your ITR
- Submit proofs to your employer (tour bills, transfer order, packer and travel invoices, school fee receipts where relevant). The employer computes the exempt amount and shows it in Form 16 Part B.
- In the ITR, the salary schedule has a section for allowances exempt under Section 10, with a drop-down for each clause (for example 10(14)(i) and 10(14)(ii)). Enter the exempt amounts shown in Form 16.
- Do not attach proofs. The ITR has no attachment facility. Keep documents in case the Assessing Officer asks for them.
If an exempt allowance was left out of Form 16, you can still claim it in the return if you have the proof, but expect the difference from Form 16 to be queried.
Example: What a Correct Claim Saves (Old Regime)
| Item | Amount (Rs) |
|---|---|
| Tour travel allowance actually spent | 1,05,000 |
| Children education allowance (2 children x Rs 100 x 12) | 2,400 |
| Hostel allowance (2 children x Rs 300 x 12) | 7,200 |
| Total exempt | 1,14,600 |
| Tax saved at the 30% slab plus 4% cess | 35,755 |
Under the new regime only the Rs 1,05,000 tour allowance would be exempt.
Documentation Checklist
- Tour and daily allowance: tour approval, tickets, hotel and travel bills
- Transfer: transfer order, travel tickets, packer and mover invoices
- Conveyance: log of official trips, as required by employer policy
- Uniform: employer uniform policy and purchase bills
- Children education and hostel: school fee and hostel receipts, as your employer's policy requires
Common Mistakes
- Treating a lump-sum relocation payment as fully exempt. Only the amount actually spent on the transfer is exempt.
- Claiming daily commuting as conveyance. Home-to-office travel is not official duty.
- Claiming children education and hostel allowance under the new regime. They are taxable there.
- Mixing up sections. Leave encashment, gratuity, commuted pension and LTA are not claimed under Section 10(14).
Key Takeaways
- Section 10(14)(i): duty-related allowances, exempt to the extent actually spent.
- Section 10(14)(ii): personal allowances with fixed limits in Rule 2BB(2).
- New regime: only tour, transfer, daily, official conveyance and disability transport allowances remain exempt.
- Proof goes to your employer, not into the ITR.
Section 10(14), 10(5), 10(10), 10(10A), 10(10AA), 10(13A) and 115BAC, Income-tax Act 1961; Rule 2BB, Income-tax Rules 1962; Income-tax Rules 2026 for tax year 2026-27.
