In general, there are three categories of allowances under the Income-tax Act: taxable allowances, fully exempt allowances, and partially exempted allowances.
a) Perquisites are extraneous benefits that an individual receives as a result of holding a particular position in society. Depending on their nature, these perquisites or fringe benefits may or may not be taxable. If expenses are incurred for official purposes, uniform allowance is excluded under Section 10 of the Internal Revenue Code (14).
b) In addition to wages, allowances are predetermined sums of money that an employer pays to a worker in order to satisfy some specific needs. Examples include the Tiffin allowance, the Transport allowance, the Uniform allowance, etc.