Professional pursuit allowance - pay less tax

What is professional pursuit allowance?

Professional pursuit allowance is a type of tax-saving flexible benefit given to employees to improve their professional skills and qualifications by the employer. It is also called a professional development allowance.

Understanding professional development allowance exemption

The government doesn’t specify the upper limit for professional development allowance. However, the common allowance is ₹5000/year in private companies.

How does it work?

Let’s assume ₹5000 is the allowance annually.

Employers will take ₹5000 from the employee’s salary and add it as a professional pursuit allowance in the salary. Now, employees can use the ₹5000 towards their upskilling. Whatever is used of the ₹5000, is tax-exempt. If not used, then employees have tax on it. For the money used, employees can claim tax exemption under section 80D.

If an employee uses ₹3000 of ₹5000, then they have to pay tax for ₹2000. Remember that you have to show proof of your spend and get it approved by your employer. Only the approved amount is eligible for tax exemption.

Where can employees use professional development allowance?

Here are some ways employees can use their learning allowance:

Online Learning Platforms: Websites like Coursera, Udemy, and LinkedIn Learning offer a wide range of courses on diverse subjects.

Universities and Colleges: Many universities offer continuing education programs, workshops, and certifications tailored for working professionals.

Professional Associations: Industry-specific organizations often provide training and development opportunities for their members.

What is required for professional development allowance proof?

The following are generally requested to process reimbursement of professional skill development allowance:

Course Information: Provide details about the course or program, including its title, description, duration, and the institution or organization offering it. This could be in the form of a course brochure, website information, or official documentation.

Cost and Payment: Submit receipts, invoices, or payment confirmations showing the expenses incurred for the course. This could include tuition fees, registration fees, course materials, and other related expenses.

Proof of Completion: If the allowance is contingent upon successfully completing the course or program, provide evidence of completion such as a certificate, diploma, transcript, or a confirmation letter from the educational institution indicating successful participation or passing grades.

Relevance to Job: Highlight how the course or training is relevant to the employee's current job or career advancement within the organization. This could be a brief explanation or a statement of purpose explaining how the skills or knowledge gained will benefit the employee's work performance or the company.