Conveyance allowance, referred to as Transport Allowance, is a kind of allowance provided by a company or organization to the employees to assist with their journey from their home region to the business place. Conveyance allowance is paid by the organization if it no longer has a transportation provider available to the employees. If the company provides transportation services, it does not pay a conveyance allowance to employees.
Salaried people aren’t required to provide any payments or receipts to claim tax exemption for conveyance allowance. It is paid on top of the basic salary slip components, and it is taxable and most effective if it crosses the tax exemption limit. Currently, the conveyance allowance exemption limit below Section 10 sub-phase 14(ii) of the Income Tax Act (1961) and Rule 2BB of the Income Tax rule is Rs. 1600 per month which comes out as Rs. 19,200 per year. An interesting thing here is that the conveyance allowance provided to UPSC individuals or the Chairman is not taxable.
What is Conveyance Allowance?
A conveyance allowance (also referred to as a transport allowance) is a special allowance that agencies offer to their employees to cover their costs while traveling to and from their workplace.
They are generally given on top of their basic pay and are relevant for tax deductions up to a limit. Generally, conveyance allowance eligibility is the most relevant to those employees who do not have any transportation system arranged via their employers. Furthermore, it depends on the employee’s role in the organization.
Conveyance Allowance Exemption Limit for AY 2023-24
There is no limit on the amount of conveyance allowance an organization can offer its employees. However, there’s a limit on the amount of exemption under the Income Tax Act as particularly below:
The sections under which this exemption is applicable are Section 10(14)(ii) of the Income Tax Act and Rule 2BB of Income Tax Rules.
The exemption limits were prolonged to Rs.1,600 per month or Rs.19,200 per year in Budget 2015, with an eye fixed on offering tax benefits to middle-class taxpayers.
You no longer want to supply any documents or proof of conveyance allowance from your organization. The full amount of Rs.1,600 per month may be claimed as tax exemption under conveyance allowance.
Special Exemption Cases
The special exemption cases for conveyances allowance are
- For blind or orthopedically handicapped people, the exemption limit is Rs.3200 per month.
- UPSC contributors do not need to pay tax on conveyance allowance under Section 10(45) of the Income Tax Act.
Conveyance Allowance allowed for Handicapped people
This allowance for handicapped people is 3200 per month The widespread deduction of INR 50,000, as announced in the Finance Act 2018 and revised in the Interim Budget 2019, isn’t always to be had for physically challenged employees.
Conveyance Allowance for central government workers
These days, the Central Board of Direct Tax has notified positive amendments in income tax rules, allowing salaried employees to assert an exemption if they follow lower salary tax slabs, which consist of exemptions on conveyance allowance extended by employers.
This new regime is relevant for the salary earned from the economic year 2020-21 and is optional. A new subsection has been given to the 2BB following the regime to implement tax regimes. These allowances include allowances granted that will meet the traveling price on a transfer or an excursion, allowances granted to fulfill the day-by-day charges incurred by the worker resulting from absence from the everyday place of duty, and allowances given to meet the conveyance expenditure in the overall performance of duty handiest if the business enterprise does not provide free conveyance to the worker. The notification also provides an exemption to the physically challenged employee on transport allowance with a limit of INR 3,200 per month.
How to Calculate Conveyance Allowance in Salary?
There isn’t any precise method for calculating the amount of conveyance allowance deduction you may avail of in an economic year. If you are a salaried individual, you get financial aid of Rs 1600 per month, that are deducted while calculating taxable salary.
If you receive different unique allowances, you may organize them with your conveyance benefits to avail of tax deductions.
For example, if you get Rs 6,000 per month as a special allowance, you could get Rs 1,600/ month of conveyance allowance with different unique allowances to claim the whole amount as an exemption. However, it’s recommended that you discuss this with a tax professional before taking any step
Latest Details of Conveyance Allowance for Central Government Workers
| Average monthly travel when on official obligation | Travel by personal car | Travel by different modes of conveyance |
|---|---|---|
| 201 – 300 km | Rs.1,680 | Rs.556 |
| 301 – 450 km | Rs.2,520 | Rs.720 |
| 451 – 600 km | Rs.2,980 | Rs.960 |
| 601 – 800 km | Rs.3,646 | Rs.1,126 |
| More than 800 km | Rs.4,500 | Rs.1,276 |
Consolidated Travelling Allowance
- A monthly traveling allowance may be granted via an able authority to any government servant whose duties require him/her to travel appreciably.
- Such an allowance will be in case of all different traveling styles for experience in the Government sector of responsibility. It may be drawn yearly, whether or not the Government servant is absent from his headquarters.
- A traveling allowance shall now not be drawn throughout departure, brief transfer, or becoming a member of time or, unless otherwise expressly provided inside the guidelines on this bankruptcy, throughout any length for which traveling allowance of another kind is drawn.
Conclusion
Now that you realize the conveyance allowance exemption limit, you may opt for an exemption when filing your returns. Furthermore, this tax alleviation is available whether you’re submitting under the old or the new tax regime.