Rule 280 of the Income-tax Rules, 2026

Where this rule sits

Rule 280 gives effect to Section 202 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.

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What this rule does

Sub-rule (1) lists the allowances, by whatever name called, for the purposes of Schedule III [Table: Sl. No. 12]: an allowance to meet the cost of travel on tour or on transfer; a sum paid in connection with transfer, packing and transportation of personal effects on transfer; an allowance, whether on tour or for the period of a journey in connection with transfer, to meet the ordinary daily charges incurred on account of absence from the normal place of duty; a conveyance allowance to meet expenditure on conveyance in performance of duties where no free conveyance is provided by the employer; a helper allowance where the helper is engaged for the performance of the duties; an academic allowance granted for encouraging academic, research and training pursuits in educational and research institutions; and a uniform allowance to meet expenditure on the purchase or maintenance of uniform for wear during the performance of duties.

Sub-rule (2) carries the Table of allowances for the purposes of Schedule III [Table: Sl. No. 13], with the place at which each is exempt in column C and the extent of the exemption in column D. Entries 1 to 3 are Special Compensatory (Remote Locality) Allowance for places covered under Tough Location Allowance-I, II and III, exempt at Rs. 7,000, Rs. 4,500 and Rs. 1500 per month respectively, in each case when exemption at Sl. No. 4, 5 or 9 is not claimed, with the localities set out state by state — the Andaman and Nicobar Islands, Arunachal Pradesh, listed tehsils and districts of Himachal Pradesh, and for entry 3 the remaining areas of Himachal Pradesh, the whole of Meghalaya and Assam, listed Sundarban areas of West Bengal and scheduled tribal and bad climate areas. Entry 4 is Compensatory Field Area Allowance at Rs. 13,500 per month for the listed areas of Arunachal Pradesh, the whole of Manipur and Nagaland, and listed areas of Sikkim, Himachal Pradesh, Uttarakhand, Jammu and Kashmir and Ladakh. Entry 5 is Compensatory Modified Field Area Allowance at Rs. 8,000 per month for listed areas of Punjab, Rajasthan, Haryana, Himachal Pradesh, Arunachal Pradesh and Assam, the whole of Mizoram and Tripura, and listed areas of Sikkim, West Bengal, Uttarakhand and Jammu and Kashmir.

Entry 6 covers an allowance to an employee working in any transport system to meet personal expenditure during duty performed in the course of running the transport from one place to another, where he is not in receipt of a daily allowance, exempt throughout India at 70% of such allowance up to a maximum of Rs. 25,000 per month. Entry 7 is Children Education Allowance at Rs. 3,000 per month per child up to a maximum of two children, and entry 8 an allowance to meet hostel expenditure on a child at Rs. 9,000 per month per child up to a maximum of two children. Entry 9 is counter-insurgency allowance to members of armed forces operating away from their permanent locations, at Rs. 22,000 per month. Entry 10 is transport allowance to an employee who is blind or deaf and dumb or orthopaedically handicapped with disability of lower or upper extremities, to meet expenditure on commuting between residence and place of duty, at Rs. 15,000 plus dearness allowance thereon per month in metro cities and Rs. 8,000 dearness allowance thereon per month in other cities. Entry 11 is high altitude (uncongenial climate) allowance to members of the armed forces, at Rs. 4,500 per month for altitude of 9,000 to 15,000 feet and altitude below 9000 feet with uncongenial climate, Rs. 7,000 per month for altitude above 15,000 feet, and Rs. 30,000 per month for all locations of the Union territories of Jammu and Kashmir and Ladakh and the States of Sikkim and Uttarakhand. Entry 12 is underground allowance to an employee working in uncongenial, unnatural climate in underground mines, at 15% of Basic Pay. Entry 13 is special compensatory highly active field area allowance to members of the armed forces, at Rs. 22,000 per month. Entry 14 is Island (duty) allowance or Island Special Duty Allowance to members of the armed forces, at 10% of basic pay for areas around the capital town of Port Blair, Kavaratti and Agatti, 16% for the listed difficult areas and 20% for the listed more difficult areas. Entry 15 is Siachen Allowance to members of the armed forces in the Siachen area of Ladakh, at Rs. 42,500 per month.

Sub-rule (3) restricts the whole rule for one class of employee: an employee who has exercised an option under section 202(4) shall be entitled to exemption only in respect of the allowances in sub-rule (1)(a) to (d) and in sub-rule (2) [Table: Sl. No. 10], to the extent and subject to the conditions, if any, specified in them.

Why it is there

Schedule III exempts prescribed allowances at Sl. Nos. 12 and 13 without saying which allowances or how much of them. Sub-rule (1) answers the first question for allowances exempt to the extent actually spent on the stated purpose, and the Table in sub-rule (2) answers the second for allowances that are exempt up to a fixed monthly figure or a percentage of pay, tied to the place of posting because the compensation is for the place. Sub-rule (3) then does the work the option under section 202(4) requires: an employee who has exercised it keeps only four of the sub-rule (1) allowances and the transport allowance for a disabled employee.

Who it applies to

• An employee in receipt of any of the allowances listed in sub-rule (1)
• An employee posted at a place named in column C of the Table in sub-rule (2)
• A member of the armed forces receiving field area, high altitude, counter-insurgency, island duty or Siachen allowance
• An employee working in any transport system who is not in receipt of a daily allowance
• An employee who is blind or deaf and dumb or orthopaedically handicapped with disability of lower or upper extremities
• An employee who has exercised an option under section 202(4)

The figures, and what each one turns on

What this means in practice

The two sub-rules work differently and are often confused. Sub-rule (1) names allowances by purpose and states no monetary figure at all, so how much of a travel, transfer, conveyance, helper, academic or uniform allowance escapes tax is governed by Schedule III [Table: Sl. No. 12] and the expenditure actually incurred, not by this rule. Sub-rule (2) is the Table of fixed limits, and each figure is capped by the allowance actually granted — the entries state the extent to which the allowance is exempt, so they do not create an exemption larger than the allowance received. Column C matters as much as column D: entries 1 to 5, 11, 14 and 15 are exempt only for the places listed, and a posting outside those places takes the allowance out of the entry however it is described in the pay slip. Entries 1, 2 and 3 are mutually exclusive with certain others — each is available only when exemption at Sl. No. 4, 5 or 9 is not claimed — so a member of the armed forces cannot stack the remote locality allowance on the field area or counter-insurgency entries. The children entries are per child and capped at two children, and entries 12 and 14 are percentages of pay rather than fixed sums. Sub-rule (3) is the provision that decides most salary computations today: an employee who has exercised the option under section 202(4) keeps only sub-rule (1)(a) to (d) — travel on tour or transfer, transfer of personal effects, daily charges on tour or transfer, and conveyance — and Table Sl. No. 10, the transport allowance for a disabled employee. Everything else in the rule is unavailable to him.

An example

An employee posted in an area covered by Tough Location Allowance-I receives a special compensatory allowance of Rs 5,000 a month and children education allowance of Rs 4,000 a month for three children. Under Table Sl. No. 1 the exemption is capped at Rs. 7,000 a month but the allowance actually received is only Rs 5,000, so Rs 5,000 is exempt. Under Table Sl. No. 7 the education allowance is exempt at Rs. 3,000 per month per child for a maximum of two children, that is Rs 6,000 a month, and the balance is taxable. Had he exercised the option under section 202(4), neither entry would be available to him under sub-rule (3), and his exemptions would be confined to the allowances in sub-rule (1)(a) to (d) and Table Sl. No. 10.

Where you meet this rule

An employee meets it in the exempt allowances shown in Form 16 and in the salary computation in his return; an employer meets it when deciding how much of each allowance to exclude while deducting tax on salary, and again when an employee exercises the option under section 202(4).

The words themselves

What people get wrong

• Claiming an exemption larger than the allowance received. Column D states the extent to which the allowance is exempt, so the amount granted is the ceiling in fact.
• Ignoring column C. Entries 1 to 5, 11, 14 and 15 apply only at the places listed against them.
• Stacking remote locality allowance with field area or counter-insurgency allowance. Entries 1 to 3 apply only when exemption at Sl. No. 4, 5 or 9 is not claimed.
• Claiming children education or hostel allowance for a third child. Entries 7 and 8 are capped at a maximum of two children.
• Looking for monetary limits in sub-rule (1). It lists allowances by purpose and states no figures; the extent is governed by Schedule III [Table: Sl. No. 12].
• Applying the full Table to an employee who has exercised the option under section 202(4). Sub-rule (3) confines him to sub-rule (1)(a) to (d) and Table Sl. No. 10.