Allowances are the financial benefits that are given to the employees by the employers over their regular salary. While some allowances are taxable under the head salaries, some are partially taxable or fully non-taxable. In general terms, any monetary benefit offered to employees for meeting expenditures over and above the basic salary is called Salary Allowances.
According to the Income Tax Act, allowances are added to the salary of an individual and taxed under the head income from salaries. The salary allowances are divided into 3 broad categories- Taxable, Non-Taxable and Partially Taxable.