Conveyance Allowance

What is Conveyance Allowance?

Conveyance Allowance, or Transport Allowance, is a financial benefit employers provide to their employees to cover commuting costs between their residence and workplace. It is a part of the salary package, separate from the basic salary, and its taxability is governed by the Income Tax Act, 1961, under Section 10(14)(ii).

Calculation of Conveyance Allowance

The maximum exemption limit for conveyance allowance is fixed:

• ₹1,600 per month or ₹19,200 per year.
• Any amount exceeding this limit is taxable under Income from Salaries.

Exemptions on Conveyance Allowance

1. General Employees: Exempt up to ₹1,600 per month.
2. Orthopedically Handicapped or Blind Employees: The exemption limit increased to ₹3,200 per month.
3. Government Employees (e.g., UPSC Members or Chairperson): Fully exempt under Section 10(45).
4. Exemptions for Official Travel:
   The following allowances are tax-free:
   • Travel expenses on tour or transfer, including airfare or rail fare.
   • Daily charges are incurred for work-related absences from the usual workplace.
   • Expenses directly related to official duties.

Steps for Filing Tax on Conveyance Allowance

1. Determine Your Eligibility: Check if your employer provides conveyance allowance and identify if you fall under any special exemption category (e.g., orthopedically handicapped).
2. Claim Exemption under Section 10(14)(ii): Calculate the exempt amount (₹1,600/month for general employees or ₹3,200/month for disabled employees).
3. Include in Tax Filing:
   • Report the total conveyance allowance under Income from Salary in your Income Tax Return (ITR).
   • Deduct the exempt amount while calculating your taxable income.
4. Maintain Supporting Documents: Keep records of salary slips, conveyance allowance breakdown, and supporting documents for tax exemption claims.
5. File Your ITR: Submit the required details through the online Income Tax Portal or seek assistance from a tax consultant.

Key Highlights

• Taxability: Only the amount exceeding the exemption limit is taxable.
• New Tax Regime: Under this tax regime, available deductions are scarce; hence, deciding to forgo available exemptions is better.
• Special Provisions: Higher exemption limits for disabled or visually impaired individuals ensure inclusivity in tax benefits.