Special allowance differs from company to company. In some companies, it constitutes any allowance or benefit granted to employees to meet specific expenses towards efficient performance of duties in an office or employment of profit (as laid down in the IT Rules, 1962).
If it is specifically granted to employees, it is exempt to the extent of actual expenditure incurred.
However, in pay slips given to employees by some companies, any number by the name of 'special allowance' is usually the leftover component of the salary, after allocations are divided into basic, LTA, transport allowance, HRA and so forth. Special allowance is, therefore, money which does not fit into any other head in a salary slip or the residual factor. After all the different components of a salary slip including benefits are allocated, the remaining sum of money which makes up the annual CTC, forms part of special allowance.
31st December 2016 From India, Delhi