Subsistence Allowance: Meaning, Rules, Calculation

The Indian government has introduced multiple allowances and benefit programs to assist employees financially during crises. The subsistence allowance is one such perk that provides essential financial support to suspended employees. The Supreme Court and High Court considered this allowance a workman’s right under Article 21 of the Indian Constitution. Keep reading to learn about subsistence allowance meaning, calculation process, and rules.

What is Subsistence Allowance?

The government offers monetary provisions to employees after suspending them due to disciplinary issues or ongoing investigations. This monetary support is termed a subsistence allowance. As the name suggests, this allowance ensures that the suspended employee's livelihood can continue without any interruption.

It aims at providing adequate financial support to help them meet their basic needs like shelter, food, and other unavoidable expenses. This allowance follows the principle that an individual is innocent until the authority cannot prove his/her guilt. Thus, the suspension period should not impose any hardship on employees and their families. Employees receive a specific percentage of their salary during their suspension.

Subsistence Allowance for Government Employees

As per section 10A of the Industrial Employment Act of 1946, employed 'workmen' in an industry are eligible for subsistence allowance. Here are the factors based on which an employee is considered a workman under Article 21 of the Indian Constitution:

• There should be a master-servant relationship.
• The nature and kind of functions the workman conducts should adhere to Government guidelines. 
• The nature of the kind of work should either be skilled, unskilled, manual, clerical or supervisory, or technical operational in nature.
• The source of employment, mode of recruitment, contract, designation, terms of employment, amount of wage, etc., should adhere to the guidelines. 

As per the Supreme Court, employees in managerial or supervisory positions are not "workmen". This is because these employees have the authority to hire and fire other employees. Thus, the government grants subsistence allowance to a specific group of employees.

Taxation of Subsistence Allowance During Suspension

Taxable Income: Subsistence allowance received during suspension is generally considered as part of the salary income of the employee. It will be included in the total income of the employee for the relevant financial year and will be taxed as per the applicable income tax slab rates.

Deductions: Employees receiving subsistence allowance are eligible for standard deductions under Section 16 of the Income Tax Act. The standard deduction for salaried individuals is ₹50,000. Employees can also claim other deductions available under various sections of the Income Tax Act, such as deductions under Section 80C (investments in PPF, EPF, life insurance premiums, etc.), Section 80D (medical insurance premiums), and other applicable sections.

Subsistence Allowance Rules

The Government of India provides subsistence allowance during the suspension of an employee to support their standard of living when they don't earn a regular income. The Central Civil Services (Classification, Control, and Appeal) Rules 1965 outlined rules for subsistence allowance. 

According to these rules, the allowance offered to suspended employees will be a fixed percentage of their basic income. However, the percentage may vary depending on the suspension duration and the nature of the charges imposed on the person. 

• Employees receive 50% of their salary as a subsistence allowance if the suspension is for 90 days.
• If this suspension extends for more than 90 days where the delay is not caused due to the employee's action, subsistence allowance will be 75% of the wage.
• The maximum suspension period should not exceed 180 days.
• Subsistence allowance does not include allowances like HRA, dearness allowance, or any other special pay.
• The subsistence allowance amount should not exceed the basic pay of an employee.

The subsistence allowance calculation method depends on the duration of the suspension period in particular. You can check out the example below for a better understanding of the calculation procedure.

Subsistence Allowance Example

Here is an example to illustrate the calculation of subsistence allowance:

Let's assume your basic salary is Rs.40000. During the first 90 days of suspension, you are eligible for a subsistence allowance of 50% of your basic pay. 

Thus, you will receive a subsistence allowance of Rs.20000 (50% of Rs.40000).

If you are suspended for more than 90 days, you will receive an allowance of 75% of your basic salary. Thus, the calculation goes as follows:

Subsistence allowance = Rs.30000 (75% of Rs.40000)

Final Word

Now that you know the meaning of the subsistence allowance, you can understand the importance of this financial support in safeguarding a suspended employee's well-being. This allowance offers a financial cushion to the suspended employee and his/her family to meet their basic needs and maintain their livelihood with dignity. The subsistence allowance calculation and standards provide detailed insights into the Indian administrative system's dedication to fairness and justice.