The income tax computation of a salaried employee is done by their employer for tax deduction purposes. Therefore, it is common for such an employee to not be worried about their salary structure and may have lesser knowledge about the allowances and exemptions that are available to them before estimating their gross total income. However, understanding the various allowances and exemptions are significant for proper tax planning. This article talks about Conveyance Allowance and the various essentials of the same.
Conveyance/ Transport Allowance
In general, Conveyance or Transport Allowance would mean the allowance provided for the means to travel or for the purpose of transport. Section 10(14) of the Income Tax Act of 1961 along with Rule 2BB of the Income Tax Rules states that the allowance may mean either of the following:
- Allowance that is granted to an employee to meet their expenditures for the purpose of commuting between their place of residence and the office/ place of duty, and back.
- Allowance that is granted to an employee working in the transport business to meet their personal expenditures while performing his duty by running of such transport from one place to another place, provided the employee does not receieve a daily allowance.
Conveyance or Transport Allowances are typically paid by an employer under the condition that there is no transportation offered by their employer.
Below are a few of the important features of the Conveyance Allowance.
- Companies that provide transportation facilities to employees are not required to offer conveyance allowance.
- Salaried individuals are not required to furnish any bills or receipts that depict that they receieve Conveyance Allowance.
- This Allowance may be grouped with other allowances such as Special Allowance.
- The exemption limit for every salaried individual is set at INR 1,600 per month.
- The amount that is offered as Conveyance Allowance may vary from one company to another. However, the tax exemption limits are uniform for all.
Conveyance Allowance Limit
For the Financial Year 2019-20 and Assessment Year 2020-21, there are no limits on the amount of conveyance/ transport allowance that a company may offer its employees. However, there does exist a limit on the amount of exemption as prescribed by the Income Tax Act.
Earlier the conveyance allowance taxation exemption limit was capped at INR 800 for a month, or INR 9,600 for a year. At the moment, the exemption limit has been extended to INR 1,600 for a month and INR 19,200 for a year as per the Budget of 2015. This was implemented with the aim to offer more tax benefits to the middle-class taxpayers.
The following table depicts the taxability of the Conveyance Allowance in India.
|Conveyance allowance for commuting from place of residence to the place of duty.||INR 1,600 per month/ INR 19,200 per annum|
|Conveyance allowance for commuting from place of residence to the place of duty for an employee who is physically disabled such as deaf/ blind/ dumb or orthopaedically handicapped with disability of lower extremities.||INR 3,200 per month/ INR 38,400 per annum|
|Conveyance allowance for employees of transport business for meeting their personal expenditure during the run of such a transport.||Exemption amount shall be lower than the following:|
Note: It is not essential for an employee to furnish any documents or proof of receiving conveyance allowance from their employer. The complete amount of INR 1,600 for a month may be claimed by the employee as tax exemptions under the conveyance allowance.
Claiming the Allowance
To claim the exemption of conveyance allowance that is granted for an employee of a non-transport business in order to commute from their residence to their office, the employee is not required to furnish any proofs of expenditure to state the actual expenditure. This is because the conveyance allowance is fixed and is available to the employee irrespective of the actual transport expenditure. However, there is one condition that has to be fulfiled by the employee. They should not have already been offered or provided with office conveyance or transport by their employer for such purposes.
Moreover, in order to avail the exemption, the employees of a transport business must not be offered daily allowances by their employer.
For Central Government Employees
|Average monthly commute on official duty||Travel by own car||Travel by any 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
A permanent allowance for monthly travels may be granted by a competent authority to a Government servant if their duties require them to travel extensively. Such an allowance shall be offered instead of any other forms of travelling allowances for commuting within the Government employee’s sphere of duty and may be drawn all the year round irrespective of the fact if the employee is absent from their headquarters or not. However, this allowance shall not be drawn during leave, temporary transfer, or joining time or, unless mentioned otherwise.
Special Exemption Cases
The following are the special exemption cases with respect to Conveyance Allowance.
- For an individual who is orthopedically handicapped/ blind/ deaf/ dumb, the exemption limit is INR 3,200 per month.
- As per Section 10(45) of the Income Tax Act, the Conveyance Allowance that is offered to the members of the Union Public Service Commission (UPSC) will not attract any taxes.