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CA Vishnu Ram
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Enlightened
Asked: 2021-09-27T22:32:28+05:30 In:

Is hill area allowance taxable?

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Is hill area allowance taxable?
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    1. Enlightened Chartered Accountant

      Hill Area Allowance is partially exempt under Section 10(14)(ii) of the Income Tax Act, 1961, read with Rule 2BB(1)(a) of the Income Tax Rules, 1962. Section 10(14)(ii): Allows exemption for special allowances or benefits granted to meet personal expenses due to conditions of employment such as locaRead more

      Hill Area Allowance is partially exempt under Section 10(14)(ii) of the Income Tax Act, 1961, read with Rule 2BB(1)(a) of the Income Tax Rules, 1962.

      Section 10(14)(ii): Allows exemption for special allowances or benefits granted to meet personal expenses due to conditions of employment such as location (hill area, remote area, etc.).

      Rule 2BB(1)(a): Specifically lists “Hill Compensatory Allowance” as an exempt allowance, subject to limits depending on the location and posting.

      Exemption Limits:

      The exemption is based on location and altitude, and the Central Government has notified specific limits:

      Location/Conditions Max Exemption (per month)
      Manipur, Mizoram, Tripura, Nagaland ₹300
      Hilly areas of Uttar Pradesh, Himachal, Assam ₹300
      Sikkim, Kashmir Valley, Darjeeling ₹600
      High altitude areas (1,000 – 2,000 m) ₹300
      Very high altitude areas (2,000 – 3,500 m) ₹1,000
      Extremely high altitude areas (above 3,500 m) ₹1,600

      (As per latest CBDT Notifications – rates subject to change by government order)

      Points to Remember:

      • Allowance must be specifically granted for posting in the notified hill area.

      • Any amount received over the exempt limit is fully taxable.

      • Proof of posting in the notified area may be required in assessment.

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