What is Conveyance Allowance: Exemption Limit, Calculation and Eligibility

Conveyance allowance is provided to cover the cost of commute and travel related to work. Apart from easing travel expenses, it also offers tax benefits under both old and new tax regimes, subject to specified conditions, helping employees reduce their overall taxable income.

Key Highlights

• Offered to employees who don't have employer-arranged transport; varies based on the employee's position.
• Exemptions are available under both the old and new regimes.
• Form 16 vs Proof: Even if not reflected in Form 16, an exemption can still be claimed if you have sufficient proof of expenses.

What is Conveyance Allowance?

Conveyance allowance is a special allowance to cover their expenses while travelling 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 allowances received. 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 can be claimed by employees under both the old and new tax regimes.

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 exemption up to the actual expenditure incurred for official purposes or the actual allowance given by the employer, whichever is lower. 

For example, if an employee spends Rs.1,200 per month on commuting, only Rs.1,200 will be exempted.

How to Calculate Conveyance Allowance in Salary?

For calculating exemption limit for conveyance allowance, the lowest can be claimed as deduction:

• Actual allowance given by the employer.
• Actual amount paid by the employee

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.