Hi Sumana,
1) If this is pay once a year/twice a year I suggest you change this allowance into IT0015 instead for simpler management. Of course you can still use IT0014 but please check your payment model configuration such as payment date and period.
a) I do not know which country you are working for, please look for that country tax wage type and add the allowance to the culmualtion class (if you want this allowance taxable) under v_512w_o
b) Simpler way is to configure PA70(fast entry), IT0014/IT0015 should be already exist in system. If you have abaper you can of course create a custom program to suit your requirement (such as entitlement base on EG/ESP etc..). Alternarivatly you can use LSMW to create a recording to input these data.
Regards,
Chris