Uniform Allowance - Exemption Limit, Rules and Calculation

A uniform allowance is a benefit provided by employers to cover the expenses of purchasing and maintaining official uniforms required for work. It is common in professions with strict dress codes, such as the police, defence, healthcare, and airlines. Under the Income Tax Act, an exemption is allowed only for actual expenses incurred. Still, this benefit is available exclusively under the old tax regime.

Key Highlights

• Provided by employers to cover the cost of official uniforms.
• Exemption allowed only under the old tax regime
• Exemption Limit: lower of actual allowance received or expenses incurred

What is Uniform Allowance?

A uniform allowance is a benefit provided by employers to cover the cost of purchasing and maintaining official uniforms that employees are required to wear while performing their duties. This allowance is common in professions where a specific dress code or uniform is mandatory, such as the police, defence services, healthcare, airlines, banking, and certain private companies.

The allowance is included in your salary, but the Income Tax Act allows you to claim an exemption on it. The exemption is limited to actual expenses incurred for uniforms, provided valid proof is submitted, such as bills or invoices. Any unspent portion of the allowance will be treated as taxable income.

Uniform Allowance Exemption Limit

As per Section 10(14)(i) read with Rule 2BB, uniform allowance is classified as a special allowance. It is not available for exemption under the new tax regime. However, under the old tax regime, an exemption can be claimed up to the lower of the following:

• The actual amount of uniform allowance received, or
• The actual expenses incurred on uniforms. 

Calculation of Uniform Allowance

While filing income tax returns, employees who have received uniform allowance can opt for tax exemption on the total amount of money they received or spent within a financial year for purchasing or maintaining their uniforms, whichever is lower. 

The uniform allowance typically covers the cost of:

• Purchasing uniforms
• Tailoring or alteration expenses
• Maintenance and laundry of uniforms
• Accessories required to be worn as part of the uniform

Uniform Allowance Exemption Under New Tax Regime

According to the latest reports by the Central Board of Direct Taxes (CBDT), only a certain number of special allowances are applicable for deduction under the new tax regime. They include the following:

• Expenditure for official tours/transfers.
• Allowances to employees with specific disabilities for commuting to/from the office.
• Conveyance allowance for employees while performing their official duties. 

However, the new tax regime does not allow the following special allowances to be applicable for exemption:

• Uniform allowance
• Academic Allowance
• Helper allowance
• Hostel allowance
• Children education allowance

Thus, individuals desiring to claim uniform allowance exemption should consider filing their taxes under the old regime. 

Final Word 

In a nutshell, uniform allowance exemption applies to all employees who are required to maintain a specific dress code while performing their official duties. They can claim a deduction on the total amount received or spent in this regard. However, they need to file their returns under the old regime to claim this benefit.