For salaried employees, there are various exemptions with respect to the allowances given by their employers. The most common allowances for salaried employees are House Rent Allowance (HRA), Leave Travel Allowance, and Transport Allowance. Here on this page let us discuss the Conveyance Allowance. There are some exemptions and benefits received by the employees with respect to the Conveyance / Transport Allowance. Read the complete article to know about this topic along with examples and calculation.
What is Conveyance Allowance?
Conveyance Allowance is offered by an employer to their employees to compensate for their travel from residence to respective workplace location and vice-versa. These are generally offered to employees on top of their basic salary component. If there is no transportation provided the employer to the employee, then this Conveyance Allowance is offered by the employer to employee. Transport allowance will not be provided if the employer offers transportation to their employees.
Transport / Conveyance Allowance Exemption
Conveyance / Transport Allowance exemption is provided under Section 10(14)(ii) of the IT Act and Rule 2BB of Income Tax Rules. Transport allowance is exempt to the extent to Rs. 1,600 pm i.e. up to Rs. 19,200 per annum. Any amount regarding Conveyance allowance paid over this limit is taxable. Rs 1600 per month is applicable with effect from April 1st, 2015 (i.e., the assessment year 2015-16 onwards). Earlier it was Rs. 800 pm. This exemption is available to an Individual, who is a Salaried Employee.
Example If you are getting Rs. 3,000 as Conveyance allowance every month, Rs. 1,600 is exempt and Rs. 1,400 is taxable per month. Thus out of Rs. 36,000 transport allowance received for the year, Rs. 19,200/- would be exempt and Rs. 16,800/- would be taxable.
- The notification issued by the CBDT (Central Board of Direct Tax) further said the exemption limit for orthopedically handicapped and blind has been doubled to Rs. 3,200 per month.
- In the case of Chairman/members of UPSC, transport allowance is not chargeable to tax (without any monetary ceiling) by virtue of section 10(45).
Conveyance Allowance Calculation
Conveyance allowance limit is Rs. 1600 per month or Rs.19,200 per year. With this limit, the calculation is very easy. Suppose apart from Basic salary and House Rent Allowance, a company is paying Special Allowance of Rs. 10,000 per month to an employee and is not paying any Transport Allowance. You can substitute Rs. 1,600 as conveyance / transport allowance and claim tax exemptions for that. The total cost for the company remains same at Rs. 10,000 pm, but an employee can save money every year in tax liability.
Frequently Asked Questions
What is the Conveyance Allowance Limit?
There is no limit on the amount of Transport allowance. A company can offer Conveyance / Transport Allowances to its employees without consideration of any limit. However, there is an Exemption Limit of this allowance under the Income Tax Act as detailed above.
My Company provides Cabs for employees, and I have been using this facility. Can I Claim benefit of Rs 1600/- per month as well?
You can not take both the benefit.
My Company provides petrol reimbursement for me, will I get a benefit of Rs 1600 /- pm as well?
No, You can not take both the benefit. You can claim any one of these.