Island Special Duty Allowance

The Island Special Duty Allowance is 10%, 16% or 20% of basic pay for postings in the Andaman and Nicobar Islands and Lakshadweep, by area remoteness.

Updated 20 August 2026

Island Special Duty Allowance (ISDA) is a compensatory allowance paid to a central government employee posted in the Andaman and Nicobar Islands or the union territory of Lakshadweep, to offset the extra cost and difficulty of island service. It is a percentage of basic pay at three rates by how remote the posting is, 10%, 16% or 20%, under Department of Expenditure Office Memorandum No. 12/1/2017-E.II(B) dated 18 July 2017, with effect from 1 July 2017. It is the island counterpart of the Special Duty Allowance for the North-Eastern Region and Ladakh.

The allowance answers a simple problem: the islands are far from the mainland, goods and services cost more there, and a posting to a remote island is a hardship the ordinary pay of the level does not capture. The Island Special Duty Allowance compensates for that, and in the hardest island areas it combines with the Hard Area Allowance to add a substantial slice to an employee’s pay.

This article sets out the three rates and the areas they cover, the way the allowance stacks with the Hard Area Allowance, why it rises with basic pay rather than through a dearness-allowance step-up, who is eligible, how it was rationalised from the 6th CPC rate, how it differs from the mainland Special Duty Allowance and from house rent allowance, and the tax position.

The three rates and the area categories

The Island Special Duty Allowance is not a single rate but three, set by how difficult the island posting is. Each is a percentage of basic pay, the pay drawn in the level of the pay matrix:

Area category	Illustrative areas	Rate
Capital-town areas	Within 8 km of the municipal limits of Port Blair, and Kavaratti and Agatti in Lakshadweep	10% of basic pay
Difficult areas	North and Middle Andaman, South Andaman excluding Port Blair; the Lakshadweep islands other than Kavaratti, Agatti and Minicoy	16% of basic pay
More difficult areas	Little Andaman, the Nicobar group, Narcondam and East Island; and Minicoy in Lakshadweep	20% of basic pay

The rate rises with the remoteness of the posting. The capital-town areas, around Port Blair and the two main Lakshadweep islands of Kavaratti and Agatti, draw 10%. The difficult areas, the outer Andaman districts and the other Lakshadweep islands, draw 16%. The more difficult areas, the far-flung ones such as the Nicobar group and Minicoy, draw 20%, the top rate. So the Island Special Duty Allowance runs from 10% in the capital-town areas to 20% in the most far-flung ones, not up to 25% as is sometimes stated.

Because the rate is a percentage of basic pay, the actual amount rises with the employee’s pay level. Two employees in the same Nicobar posting both draw 20%, but an officer at a higher level draws a larger sum than a clerk at a lower one, since each draws 20% of their own basic pay.

Stacking with the Hard Area Allowance

The island order carries one feature the mainland Special Duty Allowance does not: paragraph 4 of Office Memorandum No. 12/1/2017-E.II(B) dated 18 July 2017 makes the Island Special Duty Allowance admissible in addition to the Hard Area Allowance where the Hard Area Allowance applies. The Hard Area Allowance is granted by Office Memorandum No. 13/1/2017-E.II(B) dated 14 July 2017 at 20% of basic pay for the Nicobar group of Islands and Minicoy, and 12% for the Lakshadweep islands of Kiltan, Andrott, Kalpeni, Chetlat, Kadmat, Amini and Bithra. Kavaratti and Agatti are excluded from it by name in the subject line of that order, so the capital-town islands of Lakshadweep draw the 10% island allowance and nothing more. Where both allowances apply, the two are drawn together on the same basic pay:

Posting	Island Special Duty Allowance	Hard Area Allowance	Combined
Nicobar group	20%	20%	40% of basic pay
Minicoy	20%	20%	40% of basic pay
Kiltan, Andrott, Kalpeni, Chetlat, Kadmat, Amini and Bithra	16%	12%	28% of basic pay
Kavaratti and Agatti	10%	Nil	10% of basic pay

For the Nicobar group and Minicoy the combined figure is 40% of basic pay, the Island Special Duty Allowance at its top 20% rate plus the Hard Area Allowance at 20%. This stacking is what makes an island posting one of the better-compensated hard postings in the government. It is the opposite of the rule for the Tough Location Allowance and the mainland Special Duty Allowance, which are mutually exclusive: an employee whose posting could attract both takes only the single most beneficial one, whereas the Island Special Duty Allowance and the Hard Area Allowance are drawn one on top of the other.

A percentage allowance, so no dearness-allowance step-up

Many fixed-rupee allowances under the 7th CPC rise by 25% each time dearness allowance crosses a 50% milestone, the mechanism that keeps a rupee-denominated allowance current. The Island Special Duty Allowance does not work that way, because it is not a fixed rupee amount but a percentage of basic pay.

A percentage allowance rises on its own whenever basic pay rises. An annual increment lifts basic pay by about 3%, and the Island Special Duty Allowance, being 10%, 16% or 20% of that higher basic pay, rises with it automatically. A pay fixation on promotion or a new pay commission lifts it again. So an employee’s Island Special Duty Allowance grows year by year with the increment, without any separate order, and the 25% step-up that follows each 50% rise in dearness allowance simply does not apply to it.

Who gets it

Eligibility is by posting, not by grade or cadre. Any central government civilian employee posted in the Andaman and Nicobar Islands or Lakshadweep draws the Island Special Duty Allowance at the rate for the area, whatever their level in the pay matrix or the nature of their duty. A transfer into an island area brings the allowance with it, and a transfer out ends it, because the allowance attaches to the place, not to the person.

Civilian employees paid from the Defence Services Estimates are covered on the same terms. The armed forces and the Railways operate their own parallel orders of the same period for their personnel in the same areas, and the Indian Audit and Accounts Department employees are covered with the concurrence of the Comptroller and Auditor General. The allowance is not admissible for spells of leave, training or tour spent outside the islands beyond full calendar months, because it compensates actual island service.

The 6th to 7th CPC rationalisation

Under the 6th Central Pay Commission most employees on island postings drew the allowance at 12.5% of pay, with higher rates in the more difficult areas. The 7th Central Pay Commission rationalised the structure into the three clean bands of 10%, 16% and 20% of basic pay. The capital-town rate came down slightly, from 12.5% to 10%, in line with the Commission’s general trimming of percentage allowances, while the difficult and more-difficult areas were placed on defined higher rates of 16% and 20%.

The move matched the treatment of the mainland Special Duty Allowance, which the same Commission cut from a pre-revised 12.5% to a flat 10%. The island allowance kept its area-graded structure, three rates rather than one, because the spread of hardship across the islands, from the town areas of Port Blair to the remote Nicobar group, is wider than on the mainland areas the flat Special Duty Allowance covers.

How it differs from the mainland allowance and from HRA

Two distinctions are worth drawing. The Island Special Duty Allowance is not the mainland Special Duty Allowance: they are parallel allowances under separate orders, the mainland one a flat 10% for the North-Eastern Region and Ladakh, the island one 10%, 16% or 20% by area for the Andaman and Nicobar Islands and Lakshadweep. The defining practical difference is that the island allowance stacks with the Hard Area Allowance, while the mainland allowance and the Tough Location Allowance are alternatives.

It is also not the house rent allowance. House rent allowance compensates for the cost of housing by city class and has nothing to do with island hardship, and it is drawn alongside the Island Special Duty Allowance. Nor is it the risk and hardship allowance matrix, which pays for specific hazardous or arduous duties cell by cell; the Island Special Duty Allowance pays a flat percentage to everyone posted in the island geography, regardless of the particular duty.

A worked example

Take an employee at Level 7 with a basic pay of Rs. 50,000, posted in the Nicobar group, which is a more-difficult area. The island compensatory allowances on that basic pay build up as follows:

Component	Rate	Amount (Rs.)
Island Special Duty Allowance	20% of basic pay	10,000
Hard Area Allowance	20% of basic pay	10,000
Combined island compensation	40% of basic pay	20,000

The two island allowances together add Rs. 20,000 a month to this employee’s pay, on top of the basic pay of Rs. 50,000, the dearness allowance on that basic pay, and the house rent allowance for the area. The same employee posted in the capital-town area around Port Blair would draw only the 10% Island Special Duty Allowance, Rs. 5,000, and no Hard Area Allowance, because the Hard Area Allowance does not extend to the Andaman capital-town areas. And because the allowance is a percentage of basic pay, the figure rises every year with the increment, without any fresh order.

Tax treatment

The Island Special Duty Allowance is part of salary income and is taxable in the ordinary way; there is no blanket exemption for it. The fixed exemptions under Section 10(14) of the Income-tax Act, 1961, read with Rule 2BB of the Income-tax Rules, are for certain separately notified area allowances capped at small rupee figures, and they do not cover the percentage-based Island Special Duty Allowance, so it is taxable even under the old regime. Under the default new regime beyond Section 115BAC, the Section 10(14) special-allowance exemptions are withdrawn altogether, so the Island Special Duty Allowance is fully taxable there.

Because the island allowances can add 28% to 40% of basic pay to the pay packet in the hardest areas, an employee on an island posting has a materially higher taxable salary and should plan for the tax on the combined figure. For the wider comparison see old versus new tax regime and income tax for central government employees.

The 8th CPC outlook

The 7th Central Pay Commission set the Island Special Duty Allowance at 10%, 16% and 20% of basic pay by area, down from the pre-revised 12.5% for most employees, and kept the rule that it stacks with the Hard Area Allowance. Whether the 8th Central Pay Commission keeps the rates, changes them, or alters the stacking rule is not known, and no figure for the allowance after the 8th CPC can be stated as fact until that commission reports and its recommendations are accepted. Until then the position is 10% in the capital-town areas, 16% in the difficult areas, and 20% in the more difficult areas, drawn in addition to the Hard Area Allowance where it applies.

Frequently Asked Questions (FAQs)

What is the Island Special Duty Allowance?

The Island Special Duty Allowance is a compensatory allowance paid to a central government employee posted in the Andaman and Nicobar Islands or the union territory of Lakshadweep, to offset the cost and difficulty of island service. It is a percentage of basic pay at three rates by how remote the area is, 10%, 16% or 20%, under Department of Expenditure Office Memorandum No. 12/1/2017-E.II(B) dated 18 July 2017, with effect from 1 July 2017.

How much is the Island Special Duty Allowance?

It is 10% of basic pay in the capital-town areas, 16% in the difficult areas, and 20% in the more difficult areas such as the Nicobar group and Minicoy. It is worked out on basic pay, the pay drawn in the level of the pay matrix, so the rupee amount rises with the pay level even though the percentage is the same for everyone in a given area.

Can an employee draw the Island Special Duty Allowance and the Hard Area Allowance together?

Yes. The Island Special Duty Allowance is admissible in addition to the Hard Area Allowance where the Hard Area Allowance applies, which is granted by Office Memorandum No. 13/1/2017-E.II(B) dated 14 July 2017 for the Nicobar group of Islands, Minicoy and the seven Lakshadweep islands of Kiltan, Andrott, Kalpeni, Chetlat, Kadmat, Amini and Bithra. So an employee in the Nicobar group draws the 20% Island Special Duty Allowance and the 20% Hard Area Allowance, a combined 40% of basic pay, on top of the ordinary dearness and house-rent allowances. Kavaratti and Agatti are outside the Hard Area Allowance, so a posting there draws the 10% island allowance alone.

Which island areas fall in each rate band?

The 10% capital-town band covers the areas within 8 km of the municipal limits of Port Blair, and Kavaratti and Agatti in Lakshadweep. The 16% difficult-area band covers North and Middle Andaman, South Andaman excluding Port Blair, and the Lakshadweep islands other than Kavaratti, Agatti and Minicoy. The 20% more-difficult band covers Little Andaman, the Nicobar group, Narcondam and East Island, and Minicoy in Lakshadweep.

Does the Island Special Duty Allowance rise with dearness allowance?

It rises, but not through the step-up that lifts fixed-rupee allowances by 25% each time dearness allowance rises by 50%. Because it is a percentage of basic pay, it goes up automatically whenever basic pay rises, through an annual increment, a pay fixation on promotion, or a new pay commission. The dearness-allowance step-up applies only to rupee-denominated allowances, not to a percentage allowance that already tracks basic pay.

Is the Island Special Duty Allowance the same as the Special Duty Allowance for the North-East and Ladakh?

No, they are parallel allowances under separate orders. The Special Duty Allowance is a flat 10% of basic pay for postings in the North-Eastern Region and Ladakh. The Island Special Duty Allowance is the island counterpart, at 10%, 16% or 20% by area, for the Andaman and Nicobar Islands and Lakshadweep, and unlike the mainland allowance it can be drawn together with the Hard Area Allowance.

Is the Island Special Duty Allowance taxable?

Yes, it is taxable as part of salary; there is no blanket exemption for it. The small fixed exemptions under Section 10(14) read with Rule 2BB are for different, rupee-capped area allowances and do not cover the percentage-based Island Special Duty Allowance, so it is taxable even under the old regime. The default new regime under Section 115BAC withdraws the Section 10(14) exemptions altogether, so the allowance is fully taxable there.

What was the Island Special Duty Allowance under the 6th CPC?

Under the 6th Central Pay Commission most employees on island postings drew the allowance at 12.5% of pay, with higher rates in the more difficult areas. The 7th Central Pay Commission rationalised the structure into the three clean bands of 10%, 16% and 20% of basic pay, so the capital-town rate came down slightly while the difficult and more-difficult areas were placed on defined higher rates.

External references

References

Ministry of Finance, Department of Expenditure, Office Memorandum No. 12/1/2017-E.II(B) dated 18 July 2017: Island Special Duty Allowance for the Andaman and Nicobar Islands and Lakshadweep, at 10%, 16% and 20% of basic pay by area, with effect from 1 July 2017, and admissible in addition to the Hard Area Allowance.
Report of the Seventh Central Pay Commission, November 2015, Chapter 8 (Allowances): recommendation on the Island Special Duty Allowance and its area-graded rates.
Ministry of Finance, Department of Expenditure, Resolution No. 11-1/2016-IC dated 6 July 2017: Government decision on the 7th Central Pay Commission recommendations on allowances.
Ministry of Finance, Department of Expenditure, Office Memorandum No. 13/1/2017-E.II(B) dated 14 July 2017: grant of Hard Area Allowance to central government employees posted in the Nicobar group of Islands and islands of the Union Territory of Lakshadweep other than Kavaratti and Agatti, at 20% and 12% of basic pay, admissible in addition to the Island Special Duty Allowance.
Income-tax Act, 1961, Section 10(14) read with Rule 2BB of the Income-tax Rules, 1962, and Section 115BAC (the new tax regime, which withdraws the Section 10(14) special-allowance exemptions).