Conveyance Allowance Explained

The income tax computation of a salaried employee is handled by their employer for tax deduction purposes. Consequently, many such employees might not be fully aware of the nuances of their salary structure, including the various allowances and exemptions they are entitled to before estimating their gross total income. Understanding these allowances and exemptions is crucial for effective tax planning. This article delves into the specifics of Conveyance Allowance and its various essentials.

Understanding Conveyance/Transport Allowance

In general terms, Conveyance or Transport Allowance refers to the allowance provided to cover commuting or transport-related expenses. According to Section 10(14) of the Income Tax Act of 1961 and Rule 2BB of the Income Tax Rules, this allowance can mean either of the following:

An allowance granted to an employee to cover expenses for commuting between their place of residence and their office/place of duty, and back.
An allowance granted to an employee in the transport business to cover personal expenses while performing duties across various locations, provided the employee does not receive a daily allowance.

Employers may offer Conveyance or Transport Allowances when they do not provide direct transportation facilities for employees.

Features of Conveyance Allowance

Key features of the Conveyance Allowance include:

Companies offering direct transportation facilities to employees do not need to provide a Conveyance Allowance.
Salaried individuals are not required to furnish bills or receipts to claim Conveyance Allowance.
This allowance may be bundled with other allowances such as Special Allowance.
The exemption limit for each salaried individual is set at INR 1,600 per month.
The amount of Conveyance Allowance offered can vary between companies; however, tax exemption limits remain uniform for all.

Conveyance Allowance Limit in India

For the Financial Year 2019-20 and Assessment Year 2020-21, there are no specified limits on the amount of conveyance/transport allowance that a company can offer to its employees. However, the Income Tax Act prescribes a limit on the exemption amount.

Previously, the conveyance allowance tax exemption limit was set at INR 800 per month or INR 9,600 annually. The Budget of 2015 extended this limit to INR 1,600 per month and INR 19,200 annually, providing greater tax benefits to middle-class taxpayers.

The taxability of the Conveyance Allowance in India is as follows:

Conveyance allowance for commuting from place of residence to place of duty	INR 1,600 per month / INR 19,200 per annum
Conveyance allowance for physically disabled employees such as those who are deaf, blind, or have orthopedic disabilities	INR 3,200 per month / INR 38,400 per annum
Conveyance allowance for employees in the transport business for personal expenditure during transport	Exemption amount shall be lower than the following: 70% of such allowance; or INR 10,000 per month

Note: Employees need not furnish any documents to claim conveyance allowance. They can claim the entire amount of INR 1,600 per month as tax exemptions under conveyance allowance.

How to Claim Conveyance Allowance

To claim conveyance allowance exemption provided for commuting from home to the office, employees do not need to present proofs of expenditure. The allowance is fixed and available, regardless of actual transport expenses. However, employees should ensure they aren't already provided with office conveyance by their employer at the time of claiming.

Additionally, employees in the transport sector must not receive daily allowances from their employer to avail this exemption. For more detailed guidance on claiming conveyance and other allowances, you might find resources about digital document signing advantageous.

Conveyance Allowance for Central Government Employees

Average monthly commute on official duty	Travel by own car	Travel by other modes
201 to 300 KMS	INR 1,680	INR 556
301 to 450 KMS	INR 2,520	INR 720
451 to 600 KMS	INR 2,980	INR 960
601 to 800 KMS	INR 3,646	INR 1,126
More than 800 KMS	INR 4,500	INR 1,276

Consolidated Travelling Allowance for Frequent Travelers

A Government servant may receive a consolidated traveling allowance if their duties necessitate extensive travel. Offered by a competent authority, this allowance covers commuting within their duty area and may be drawn all year, except during leave, temporary transfer, or joining time. A full review on related allowances could be facilitated by understanding different forms, such as Form MGT-6 and others.

Special Exemption Cases for Conveyance Allowance

Certain individuals qualify for special exemptions within the Conveyance Allowance framework:

Individuals who are orthopedically handicapped, blind, deaf, or dumb have an exemption limit set at INR 3,200 per month.
As per Section 10(45) of the Income Tax Act, Conveyance Allowance for members of the Union Public Service Commission (UPSC) are tax-exempt.

With these insights into conveyance allowances, salaried employees can plan their taxes effectively. To further explore taxation subjects, consider exploring GST annual returns and other relevant filings.

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Frequently Asked Questions

Common questions about Conveyance Allowance.

Conveyance Allowance is an allowance provided by employers to employees to cover their expenses for commuting between their residence and workplace. It aims to assist employees in meeting the costs associated with daily travel to and from work.

Yes, there is a limit on the amount of Conveyance Allowance that can be claimed as tax-exempt. For the financial year 2019-20 and assessment year 2020-21, the exemption limit is set at INR 1,600 per month or INR 19,200 per annum for regular employees.

No, employees are not required to furnish any bills or receipts to claim the tax exemption for Conveyance Allowance. The entire amount of INR 1,600 per month can be claimed as tax-exempt.

For employees working in the transport business, Conveyance Allowance is taxable if they receive daily allowances from their employer. The exemption amount for such employees is limited to the lower of 70% of the allowance or INR 10,000 per month.

Yes, for individuals who are orthopedically handicapped, blind, deaf, or dumb, the exemption limit for Conveyance Allowance is higher at INR 3,200 per month or INR 38,400 per annum.

Yes, Conveyance Allowance can be grouped together with other allowances, such as Special Allowance, by employers.

No, Conveyance Allowance is typically not offered to employees who are already provided with transportation facilities by their employer for commuting between their residence and workplace.

Yes, Central Government employees are eligible for Consolidated Travelling Allowance, which is a permanent allowance granted for monthly travels if their duties require extensive travel. The allowance amounts vary based on the mode of travel and distance covered.

No, as per Section 10(45) of the Income Tax Act, Conveyance Allowance offered to members of the UPSC is exempt from taxation.

Generally, Conveyance Allowance is not applicable for employees who work from home, as they do not incur expenses for commuting between their residence and a separate workplace. However, specific company policies may vary in this regard.