Q.Distinguish between Dearness Allowance, City Compensatory Allowance and Medical Allowance in terms of their tax treatment under the head Salaries.

Salary is charged to tax under Section 15 on whichever is earlier of the due basis or the receipt basis, so that no instalment of salary is ever taxed twice or escapes tax altogether; arrears not already taxed in an earlier year are taxed in the year they are actually paid. Section 17(1) then defines "salary" broadly, and this chapter works through the specific allowances the syllabus names. Basic Salary, Dearness Allowance, City Compensatory Allowance, Medical Allowance and Bonus are all fully taxable with no exemption. House Rent Allowance [Section 10(13A)/Rule 2A] is exempt up to the LEAST of actual HRA received, rent paid minus 10% of salary, and 50%/40% of salary depending on whether the city is one of the four named metros. Children Education Allowance is exempt up to ₹100 per month per child (maximum t …