Navigating Tax on Special Allowance: How Can We Make It Non-Taxable Without a Car?

Dear friends,

My wife has recently joined a company. Her salary structure includes Special Allowance of Rs. 8500 per month. The Accounts department says that my wife would have to provide a car hire agreement to avoid tax on such allowance. The problem is that I don't own a car, and those who do may face issues themselves because the car hire amount is paid to them by cheque, leading to a complex cycle of payments—from the company to the car owner and then from the car owner to my wife. Additionally, there is the added burden of income tax for the car owner.

Can you suggest any other way in which the special allowance amount can become non-taxable?

Regards, Amit

Special allowance is taxable. Is she covered under the tax net? What is her total taxable income?

HRA or actual house rent paid can be claimed for tax exemption.

If she owns a car or two-wheeler, tax exemption is available towards fuel and maintenance charges.

Dear Amit,

The referred exemption is available only when an employee owns a car and uses it for official work. When your wife does not own a vehicle, this tax exemption cannot be extended to her. It is futile and unpatriotic to insist on a way to avoid tax payment. You should feel happy and proud that the IT you pay is used in building the nation.

Warm regards.

Hello all,

Even I have a special allowance in my new offer letter and want to know how it will be paid to me if I fail to pay bills every month. Will it be paid annually if I don't pay bills or do I need to claim it every month? Please help.