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What are allowances? Are all allowances taxable?

Allowances are fixed amounts, apart from salary, which are paid by an employer for the purpose of meeting some particular requirements of the employee. There are generally three types of allowances for the purpose of income tax which are as follows:

1. Fully Exempted Allowances
2. Fully Taxable Allowances
3. Partially Exempted Allowances

The details regarding the implications of various allowances are given categorically in the next few pages