Transport Allowance and Conveyance Allowance

Transport Allowance for Salaried Employees: Tax Exemption, and Limitations

Finance Tax Planning

Transport Allowance or Conveyance Allowance is a type of allowance that you’ll come across while going through your salary slip in excel format. And it might seem just like another allowance like the Dearness Allowance, House Rent Allowance, and so on. But, there’s much more to it that is very important to know.

This article will tell you everything you need to know about it like its definition, tax exemption, the quantum of exemption, etc. Moreover, we’ll also tell you if transport and conveyance allowance is the same thing or not. So, read on to find out!

What Is Meant By Transport Allowance?

Transport allowance is the amount provided to the employees by their employer to compensate for their travel expenses. So, the expenditure you need to bear your daily office commute is provided in the form of transport allowance

Your Travel Allowance is tax-exempt as per the Section 10(14(ii)) of the Income Tax Act, 1961 up to a limit of INR 1,600 per month. Any extra amount above that, collected as Transportation Allowance, is taxable as per your income slab.

If your company provides a means for office transport, the transport allowance will not be provided. Furthermore, if your company offers the facility of transportation and you don’t take it up. Then also, you won’t receive any transportation allowance.

Important Features of Transport Allowance

Given below are some of the major features of transport allowance that should probably know:

  • The basic TA limit is fixed at INR 1,600 per month
  • If your company offers transportation services, then you will not receive the transport allowance.
  • The amount you draw as Transport Allowance can differ but the limit for tax exemption is set at INR 1,600 per month or INR 19,200 per year.
  • The salaried individuals do not need to furnish bills or receipts to avail of their transport allowance. 
  • You can group your transport allowance with your Special Allowance that is set at INR 5,000. Since the special allowance is fully taxable, so you can take INR 1,600 from it as TA and avoid taxes on that portion.
  • Keep in mind that you cannot draw your travel allowance during your leave.

Exemption Limit on Transport Allowance

You can claim for an exemption of your transport allowance as per Section 10 (14b) of the Income Tax, Act. The exemption provided consist of the following:

  • Transport allowance provided for daily commute from the employee’s residence to the office: INR 1,600 per month / INR 19,200 per annum.

For example, Mr XYZ draws a transport allowance of INR 23,000 while Mr ABC gets INR 19,200 as his TA. So, Mr XYZ is liable to pay taxes as per his income slab on the extra INR 3,800 (INR 23,000 – INR 19,200). But, Mr ABC is not entitled to pay any tax on the TA that he collects.

  • Transport allowance provided for a physically challenged employee who is blind, deaf, dumb, or has a disability of lower parts: INR 3,200 per month or INR 38,400 per annum.
  • Transport allowance for an employee of a transport business for compensating personal expenses while executing such transport: 70% of the allowance or INR 10,000 per month.

Changes in Transport Allowance Exemption by the Finance Act, 2018

The Finance Act passed in 2018 stated that a standard deduction of INR 40,000 is permitted. It consists of the transport allowance of INR 1,600 per month plus a medical allowance of INR 15,000. This came in effect from the FY 2018-19. 

So, as per this act, no separate TA of INR 1,600 per month is provided to employees save the physically challenged ones and the employees of a transport business. However, standard deduction (that includes the TA) was increased from INR 40,000 to INR 50,000 back in the Interim Budget of 2019. 

Transport Allowance As Per the New Tax Regime (FY 2020 to 21) 

The Government has provided an optional new tax regime from the financial year 2020 to 2021. And in it, there are no tax deductions or exemptions allowed. So, if you opt for the new taxation rules, then you are not allowed to claim exemptions on HRA, the standard deduction and so on. But, you can claim an exemption for the following transport allowances:

  • Allowance provided by your employer to compensate for the travel cost on tour or transfer. This includes aeroplane fare, rail fare, and all other transportation costs incurred during the tour or transfer.
  • Allowance provided to compensate for all basic charges incurred by the employee while on a tour or transfer, being absent from the usual duty location. This includes food expenses and other daily travel costs as well. 
  • Allowance to compensate for travel expenses incurred during executing the duties of the office or employment. 
  • If the employee is physically handicapped (blind, deaf, dumb, or orthopedically handicapped), then they can claim an exemption for transport allowance. This consists of the expenses for commute between the place of work and the employee’s residence. The benefit provided is up to INR 3,200.

Is Transport Allowance the Same As Conveyance Allowance?

No, both of these allowances sound the same and many might use the terms interchangeably. But, as it turns out, these are quite different from one another. Check out the following points that highlight the difference between conveyance allowance and transport allowance:

  • Definition

Transport allowance is the allowance an employee receives as compensation for expenses incurred in travelling daily between home and office. Many people might take this for the meaning of conveyance allowance as well. But, conveyance allowance is the allowance provided to the employee to compensate for the expenses incurred on commute while executing the company’s duties. 

  • Fixed or Variable

Moreover, while the transport allowance remains fixed, the conveyance allowance can be variable. Your conveyance allowance depends on the actual commute expenses incurred while you were executing the duties of employment. 

  • Taxability

Wondering if both transport and conveyance allowance is taxable or not? Let me answer your question. You can always extract more allowance under the belt of TA if you need to, but it is not tax-exempt beyond the taxation limit (i.e. INR 1,600 for regular employees). While the conveyance allowance is tax-exempt and does not have any limit imposed on it.

FAQs

Q1. Do I need to pay income tax on conveyance allowance?

Ans. No, you don’t need to pay any income tax on your conveyance allowance. But, you do need to pay the taxes on your transport allowance as per your income slab once it crosses the exemption limit.

Q2. Does the Income Tax Rules include conveyance allowance in the salary deduction?

Ans. No, the conveyance allowance is not included in your standard salary deduction. But, the Finance Act passed in 2018 has replaced the transport allowance with the standard deduction of INR 50,000 p.a. So, now, the standard deduction consists of your transport and your medical allowance

Q3. How to calculate conveyance allowance?

Ans. Conveyance allowance calculation is no rocket science at all. It is the amount of money spent on commute while you were executing your office duties. And for transport allowance, the amount is fixed at INR 1,600 per month. This amounts to INR 19,200 regardless of whichever tax slab you fall under.

Q4. Do I need to furnish any documents to receive Travel or Conveyance allowance?

Ans. You do not need to furnish any documents or proof to receive your Travel Allowance. It is a fixed amount of money (INR 1,600 per month) that every employee of the company is entitled to. 

Q5. How much amount can be claimed on Conveyance Allowance?

Ans. You can file your claim for Conveyance Allowance under Section 10(14(ii)) of the IT Act, 1961. Point to be noted here is that you can claim up to INR 19,200 as your Transport Allowance deduction per annum. But, for conveyance allowance you don’t need to file a claim, it is tax exempted.

Q6. Can I get a transport allowance even if I don’t use the company’s transport service?

Ans. No, if your employer provides transportation services, then you won’t receive any conveyance allowance regardless of whether you avail of the service or not.

 

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