Income tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

26 August 2014 Sir,
Please suggust us for taxability of risk Allowance given by Central Government to his employees.
If it is exempt please guide in which section and para no..

Regards,

Sunil Pareek

Querist : Anonymous

Querist : Anonymous (Querist)

28 August 2014 Sir,
Please guide on Taxability of Risk allwance given by the central government to his employees.

Regards,

Sunil Pareek

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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31 July 2024 Risk allowance given by the Central Government to its employees is considered part of the salary and is generally taxable under the head "Salaries" as per the Income Tax Act, 1961. However, there are specific exemptions and deductions available for certain types of allowances provided to government employees under particular conditions.

### Taxability of Risk Allowance

1. **General Rule**:
- Risk allowance, like any other allowance, is taxable unless there is a specific exemption provided under the Income Tax Act, 1961.

2. **Relevant Sections**:
- **Section 10** of the Income Tax Act provides for various exemptions on allowances, but there is no specific exemption for risk allowance provided to government employees mentioned in this section.
- **Section 17(1)** of the Income Tax Act defines "salary" to include wages, annuity, pension, gratuity, fees, commission, perquisites, profits in lieu of or in addition to salary or wages, advance of salary, and any other sum which can be considered as income from salary. This would generally include risk allowance as well.

3. **Specific Exemptions (if applicable)**:
- While Section 10(14) allows for exemptions on special allowances specifically granted to meet expenses incurred in the performance of duties, risk allowance does not fall under the specifically listed exempt allowances in the Income Tax Rules.

4. **Exemption for Certain Types of Allowances**:
- **Section 10(14)(i)** exempts any special allowance or benefit granted to an employee to meet the expenses wholly, necessarily, and exclusively incurred in the performance of duties of an office or employment of profit to the extent to which such expenses are actually incurred.
- However, for risk allowance to be considered under this provision, it must be shown that the allowance is granted specifically to meet expenses incurred in performing duties and that the expenses are actually incurred. Typically, risk allowance is not viewed in this light.

### Conclusion

- **Risk Allowance Taxability**: As per the current provisions of the Income Tax Act, risk allowance given by the Central Government to its employees is taxable as part of the salary income.
- **No Specific Exemption**: There is no specific exemption provided for risk allowance under Section 10 or any other section of the Income Tax Act, 1961.
- **Taxable under Salaries**: Thus, it is taxed under the head "Salaries" and subject to tax as per the applicable income tax slab rates for the employee.

### Recommendations

1. **Clarification from Employer**:
- Employees receiving risk allowance should seek clarification from their employer or the relevant government department regarding the tax treatment of the allowance.

2. **Professional Advice**:
- It is advisable to consult a tax professional or a chartered accountant to ensure proper compliance and to explore any possible deductions or exemptions that might apply to specific cases.

3. **Review Government Notifications**:
- Stay updated on any new notifications or circulars issued by the Central Board of Direct Taxes (CBDT) or the government, which might provide specific exemptions or clarifications related to risk allowance.

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