International · allowance
Cost of living allowance (COLA)
COLA on an overseas posting is taxable salary for private-sector employees; residency then decides where it is taxed.
How the taxable value is determined
No specific exemption applies to private-sector cost-of-living allowances. Whether India taxes the amount depends on your residential status for the year and any applicable double taxation avoidance agreement.
Regime availability
- Old regime
- Not available
- New regime
- Not available
Documentation to keep
Assignment letter and a record of days spent in and outside India.
Legal basis: Section 17(1) read with Section 6, Income-tax Act
Frequently asked questions
Is cost of living allowance (cola) taxable in India?
COLA on an overseas posting is taxable salary for private-sector employees; residency then decides where it is taxed. No specific exemption applies to private-sector cost-of-living allowances. Whether India taxes the amount depends on your residential status for the year and any applicable double taxation avoidance agreement.
Does the exemption apply under the new tax regime?
Under the old regime this treatment is not available; under the new regime it is not available. Legal basis: Section 17(1) read with Section 6, Income-tax Act.
What records should I keep for cost of living allowance (cola)?
Assignment letter and a record of days spent in and outside India.
Related tools & guides
Reflects provisions in force for FY 2026-27; verify against the latest government publications (incometax.gov.in). Information, not tax advice.