What is Conveyance Allowance: Exemption Limit, Calculation and Eligibility

Companies usually provide special allowances to their employees as a token of appreciation for their exemplary performance. These allowances are credited to them as part of their salary to cover the expenses incurred while performing their official duties. Conveyance allowances are one of the such allowances provided to meet transportation or commuting costs related to employees' work responsibilities. Moreover, such allowances come with tax benefits, which employees can claim while filing their returns under both old and new tax regimes, subject to certain conditions laid down in the Income Tax Rules.

What is Conveyance Allowance?

Conveyance allowance is a special allowance companies provide to their employees to cover their expenses while travelling to and from their workplace to perform office or employment duties.

They are usually offered on top of their basic pay and are eligible for tax deductions up to the actual expenses amount or a maximum of Rs. 1,600 per month (Annually Rs . 19,200). Generally, conveyance allowance eligibility is only applicable to employees who do not have a transportation system arranged by their employers. Furthermore, it depends on the employee’s position in the organisation. 

Conveyance Allowance Exemption Limit for AY 2025-26

According to Section 10(14)(ii) of the Income Tax Act and Rule 2BB of the Income Tax Rules, salaried individuals can claim conveyance allowance that is exempted up to the actual expenditure incurred for the official purpose or the limit up to Rs.1,600 per month (Annually Rs.19,200), whichever is less, will be exempted.

Now, employers are not limited in the conveyance allowance they provide to their employees. Moreover, the allowance amount will vary across companies, but the exemption amount will be subject to the prescribed maximum limit.
However, there are certain exemptions: 

• The conveyance allowance (Transport Allowance) tax exemption limit for visually impaired or orthopedically handicapped individuals is Rs 3,200/month.   
• According to Section 10(45) of the Income Tax Act, UPSC members do not have to pay any tax on conveyance allowance. 

As per Central Board of Direct Taxes (CBDT) rules, employees do not need to furnish any documents regarding this when filing their income tax returns.  

Note: This is only available under the new regime.

How to Calculate Conveyance Allowance in Salary?

There is no specific method for calculating the amount of conveyance allowance deduction you can avail of within a financial year. If you are a salaried individual, the maximum relief available is Rs 1,600/month or Rs 19,200/annum, which you can deduct while calculating your taxable income. 

A sufficient document, such as a bill or expense receipt, is required as proof to claim a deduction for conveyance allowances. The deduction of conveyance allowances is available under both the old and new tax regimes of the Income Tax Act.

If you receive other special allowances, you can group them with your conveyance benefit to avail of tax deductions.

Points to Remember when filling ITR

Form 16: The details of the conveyance allowance and the taxable portion after exemption are reflected in Form 16, provided by the employer. This form is essential for employees when filing their income tax returns.

Income Tax Return (ITR): While filing ITR, the exempt and taxable portions of conveyance allowance should be appropriately reported under the "Income from Salary" section.

Final Word 

Conveyance Allowance is a beneficial component of the salary structure that helps employees manage commuting costs. Now that you know the conveyance allowance exemption limit, you can opt for an exemption accordingly while filing your returns. Furthermore, this tax relief is available regardless of whether you are filing under the old or the new tax regime.