Taxability of Armed Force Allowance

By | May 5, 2026
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Taxability of Armed Force Allowance

Introduction
Armed forces personnel receive various allowances for serving in challenging and risky conditions. These allowances are partially or fully exempt from tax under the Income-tax Act, subject to prescribed limits.

Eligible Armed Forces
Members of the following forces qualify:

  • Indian Army, Navy, Air Force, Coast Guard
  • Central Reserve Police Force, Border Security Force, Assam Rifles, and others

Key Allowances and Exemptions

  • Counter Insurgency Allowance
    • Exempt up to 3,900/month (cannot claim Border Area Allowance simultaneously).
  • Border Area Allowance
    • The exemption depends on the specific location. For instance, the allowance is exempt up to 1,300 in Sikkim and Chamoli, whereas it is only up to Rs. 750 in Manipur, Tripura, and certain other notified areas.
  • Special Compensatory (Hilly Areas) Allowance
    • Exempt amounts vary by altitude/location:
      • 800/month for specific hilly areas.
      • 7,000/month for Siachen.
      • 300/month in all places located at height of 1000 metres or more above the sea level.
    • Tribal Area Allowance
      • Exempt up to 200/month in certain states (e.g., Madhya Pradesh, Karnataka).
    • Compensatory Field Area Allowance
      • Exempt up to 2,600/month (cannot claim Border Area Allowance simultaneously).
    • Compensatory Modified Field Area Allowance
      • Exempt up to 1,000/month for specific areas.
    • Underground Allowance
      • Exempt up to 800/month for work in underground mines.
    • High Altitude Allowance
      • Exempt up to 1,060 per month for altitudes between 9,000 and 15,000 feet.
      • Exempt up to 1,600 per month for altitudes above 15,000 feet.
    • Special Compensatory Highly Active Field Area Allowance
      • Exempt up to 4,200/month.
    • Island Duty Allowance
      • Exempt up to 3,250/month for postings in Andaman & Nicobar or Lakshadweep Islands.

Key Conditions

  • Exemptions are allowed irrespective of actual expenditure incurred by personnel.
  • Specific exemptions cannot be claimed simultaneously (e.g., Counter Insurgency and Border Area Allowances).