Travel Allowance is an allowance an organization or organization gives to employees to cover the cost of their traveling from their residence to their place of work. It is a type of special allowance given to employers. Like different allowances, travel allowance is part of CTC and has constant pay.
As the worker’s salary tax computation is completed by their employers for tax deduction purposes, salaried taxpayers may or may not be involved in their salary structuring and details of various types of allowances and exemptions available to them even before reaching gross Salary. However, understanding allowances and exemptions provided on such allowances is also important for tax-making plans. This facilitates them to select the right CTC structure and lawfully declare the tax gain to which they’re entitled. In this article, we are going to tell you about travel allowances.
What is Transport Allowance?
Transport allowance is an allowance given to employees, so they can cover the costs of traveling from home to office and office to home. However, travel allowance under Section 10(14) of Income-tax Act, 1961 examine with rule 2BB of Income-tax policies can be either of the following:
- Allowance granted to an employee to fulfill his expenditure to commute between his place of residence and office/vicinity of responsibility
- Allowance granted to a worker running within the travel enterprise to meet his expenditure all through his duty accomplished in the path of walking such travel from one place to every other location given to the employee isn’t always in receipt of every day allowance.
Transport allowance is taxable in the hands of the employee when you consider that it’s important to add to their gross salaries. However, employees can declare tax exemption for transport allowance as consistent with the exemption limit.
Also Read:- What is a Salary Slip? | What is Conveyance Allowance? | What is the Dearness Allowance?
Who receives Transport Allowance?
Not all of us receive the travel allowance. Only the employees whose agency specially provides it in their CTC structure get it. Thus, the relationship between the organization and the worker must exist as a precondition for receiving the travel allowance. In this approach all salaried people are eligible for receiving a travel allowance and self-employed people can’t declare it.
What are the Types of Travel Allowances?
Depending on the role of the individual, travel frequency, financial conditions of the organization, and more such factors, different sorts of travel allowances can be offered to a worker.
- Fixed Travel Allowance: A fixed travel allowance in Salary indicates the amount offered to the employees regardless of their real expenses.
- Daily Travel Allowance: A daily travel allowance is given to employees daily. This allowance covers expenses of their travel, food, accommodation, and other such expenses.
- Mileage Allowance: Employers can also provide a miles-based travel allowance to their employees, which relies upon the number of miles they travel for business purposes.
- Travel Reimbursement: A travel reimbursement depends on the real rate proofs submitted by an employee, which may encompass travel via air, rail, or road. This type of travel allowance offered via a company may also depend on various factors consisting of the role of the person, frequency of travel, and financial conditions of the company
Quantum of Exemption
Section 10(14) examines Rule 2BB presents for transport allowance exemption. The quantum of exemption is as follows.
| SR. No. | Particulars | Exemption Limit |
|---|---|---|
| A. | Transport allowance for commuting from house to office location of obligation (with impact from FY 2018-19, no such separate travel allowance is allowed) | Rs 1,600 per month or Rs 19,200 per annum |
| B. | Transport allowance for commuting from the area of the house to the area of responsibility for an employee who’s physically challenged, inclusive of blind/deaf/dumb or orthopedically handicapped | Rs 3,200 per month or Rs 38,400 per annum |
| C. | Transport allowance for employees of travel enterprise for meeting personal expenditure in the course of running such travel | Exemption amount shall be lower of following: a) 70% of such allowance; or b) Rs. 10,000 per month. |
Changes through Finance Act, 2018
From the financial year 2018-2019, the tax exemption for medical and travel allowances has been merged. The Income Tax Department introduced a popular deduction in the location of travel and medical allowance. From the economic year 2019-2020, the same old deduction is Rs 50,000, which covers the transport and medical allowance.
- Thus, employees can declare the deduction of Rs 50,000 whilst filing their ITR without generating any bills or documents. Employers will keep in mind the usual deduction to compute the net taxable Salary even as calculating the TDS.
- This alternate shall take effect from the financial year 2018-19. Accordingly, no separate travel allowance of Rs 1,600 per month is to be given to employees apart from physically challenged employees and employees of a travel company.
- The limit of Rs 40,000 has been increased to Rs 50,000 in Interim Budget 2019.
Difference Between Transport Allowance and Conveyance Allowance
A travel allowance is an allowance given to meet commuting charges among the location of home and office or to meet the private expenditure of a worker of a travel enterprise. A conveyance allowance is an allowance that is given to meet the conveyance needs.
Further, even as a set amount of travel allowance is exempt regardless of real expenditure, conveyance allowance is exempt from tax best to the extent of real expenditure incurred.
Example,
Let us derive the taxable Salary for FY 2017-18, FY 2018-19, FY 2019-20, and FY 2020-21 onwards.
Particulars Case 1: FY 2017-18
(Amount in Rs) Case 2: FY 2018-19
Amount (in Rs) Case 3: FY 2019-20 & FY 2020-21
Amount (in Rs)
Basic salary 4,50,000 4,50,000 4,50,000
Transport allowance 22,000 22,000 22,000
Transport allowance exemption (19,200) – –
Net Salary 4,52,800 4,72,000 4,72,000
Standard deduction – (40,000) (50,000)
Taxable Salary 452,800 4,32,000 4,22,000
Transport Allowance Under the New Tax Regime (FY 2020-21 onwards)
From the FY 2020-21, the authorities offer a new tax regime for individual and HUF taxpayers. In the new tax regime, there are flat tax charges and no deductions or exemptions. For example, an individual choosing the new tax regime can’t claim exemptions for HRA, popular deduction, and others. Also, the person cannot claim deductions for any tax-saving investments. However, the new tax regime allows the individual to get the following tax-exempt allowances.
- Allowance via the company to fulfill the price of travel on excursion or switch. It consists of an allowance toward the cost of travel.
- Any allowance via the agency to satisfy the ordinary day-by-day fees incurred by employees because of absence from the same old location of obligation. The allowance needs to be in admiration of the excursion or during the transfer experience. The allowance consists of the Salary a worker incurs for food and different daily fees, even as traveling.
- Allowance to satisfy conveyance fee incurred whilst appearing obligations of a workplace or employment of income. However, in this example, the company must not offer a free conveyance to the worker. The allowance includes traveling costs an employee incurs at the same time as performing respectable responsibilities.
In the case of a worker who is blind, deaf dumb, or orthopedically handicapped, with an incapacity of decreased extremities can declare a travel allowance to fulfill expenditure on commuting between the house and the vicinity of responsibility. The benefit is up to Rs 3,200 per month.
How to get Transport Allowance whilst submitting ITR?
Generally, your organization takes care that you receive the benefits of tax exemption on transport allowance at the time of deducting your TDS from your paycheck. Then, all you have to do is just enter the amount of your Form 16 part B in the Income from Salary column of your ITR Form.
But in case you need to check whether or not your organization has given you a complete tax benefit on travel allowance or he forgot to offer the tax benefit on your Form 16, then here is what you have to do
- Firstly test your CTC shape out of your salary slip.
- See how a good deal of Transport Allowance is part of your CTC.
- If the amount of allowance in CTC form is much less than Rs. 1600 per month, then the whole quantity could be tax-free.
- If the amount in the CTC form is more than Rs.1600 according to month, then the tax-free amount would be to the extent of Rs. 1600 according to month most effectively.
- Check that the accurate amount has been reduced in Form 16 from the Salary.
- If you have not decreased the perfect amount in Form 16 from Salary, then you can decrease it and may declare it on your ITR.
Conclusion
Travel allowances are given to employers to cover the prices related to work travel. Different styles of travel allowances, including fixed allowances, daily allowances, mileage allowances, and travel reimbursements, may be supplied based totally on various factors. Each employer needs to understand the tax rules and regulations governing travel allowances, such as exemption limits, proof of travel, taxation on excess amounts, TDS deductions, and the inclusion of travel allowances in an employee’s Salary. Compliance with those rules guarantees proper documentation and accurate reporting of journey allowances for taxation purposes.