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Allowances are taxable income

UNI

In a significant judgment adversely affecting millions of employees both in public and private sectors, the Supreme Court has held that the dearness allowance, city compensatory allowance (CCA) and the house rent allowance (HRA) given to them would be ''taxable income.''

In view of the amendment in the definition of the word ''income'' the court pointed out, any special allowance or benefit, specifically granted to an assessee to meet expenses wholly, necessarily and exclusively for the purpose of the duties of an office would be included in the word ''income''.

''It has also been pointed out that under sub-clause (iiib) of clause (24) of section 2 of the act, any allowance granted to an employee-assessee either to meet his personal expenses at his place of work or his place of residence or to compensate him for the increased cost of living is also to be included in income. Therefore, it is conceded that the payment of the HRA or the CCA would be covered by the word 'income'," the court clarified.

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