Q.Mr. Z has two children and, during the previous year 2025-26, received Children Education Allowance of ₹300 per month per child and Transport Allowance of ₹2,000 per month. Compute the taxable amount of each allowance for AY 2026-27 if

Children Education Allowance is exempt the same way for every employee, but Transport Allowance's exemption depends entirely on whether the employee is specially-abled.

Children Education Allowance: Mr. Z received ₹300 × 2 children × 12 months = ₹7,200 during the year. The exemption is ₹100 per month per child, for a maximum of 2 children = ₹100 × 2 × 12 = ₹2,400. Taxable CEA = ₹7,200 − ₹2,400 = ₹4,800. This figure is exactly the same regardless of whether Mr. Z is specially-abled or not, since the CEA exemption itself does not depend on the employee's own disability status.

Transport Allowance: Mr. Z received ₹2,000 × 12 = ₹24,000 during the year.

(a) If Mr. Z is NOT specially-abled, no exemption is available at all (the general blanket exemption was withdrawn from AY 2019-20 onward) — the entire ₹24,000 is taxable. …

Applying the specially-abled Transport Allowance exemption to every employee by mistake, or applying it as a straight subtraction (received minus ₹3,200/month) even when the amount received is already below the ceiling — when the amount rec …