All employers offer conveyance allowance to their employees as compensation for their travelling costs incurred from their house to the office.
The extra allowance companies pay their employees to reimburse their travel from their home to workplace, and vice-versa is called conveyance allowance. This extra amount of money is a part of the employee’s cost to the company. However, it is taxable if the allowance crosses the exemption limit.
Scroll down to know more about the meaning of conveyance allowance and other related details!
Companies in India offer a conveyance allowance to all their salaried employees. It is called transportation allowance because it compensates an employee’s daily travelling expenses from his/her residence to the workplace and vice-versa.
Moreover, when an employer does not provide transportation facilities to their employees, he/she pays conveyance allowance.
According to the Income Tax Act, this additional allowance may or may not be taxed. However, an individual is eligible for exemption under Section 10(14)(ii).
Employers can offer any amount for conveyance allowance, and there is no specific limit on it. However, according to the budget announced in 2022, the exemption limit is Rs. 1,600 per month or Rs. 19,200 per annum.
The conveyance allowance exemption limit was Rs. 800 per month and Rs. 9600 per year earlier. It was increased for the benefit of middle-class taxpayers.
Some essential features of transportation allowance are as follows:
The provisions of Section 10 of the IT Act deals with the exemption of taxes on conveyance allowance; all salaried employees can avail exemptions.
There are certainly exceptional cases where this limit will vary. For example, in the case of blind, deaf or physically disabled individuals, the exemption limit on transportation allowance is Rs. 3,200 per month. Additionally, UPSC members are relieved from paying taxes on their transportation allowance as stated under Section 10(45) of the Income Tax Act.
The conveyance allowance is calculated on an employee’s basic salary. The maximum exemption limit will remain the same for all employees irrespective of whether they fall under the income tax paying bracket.
The following example explains the calculation of conveyance allowance:
In a month, an employee is granted a conveyance allowance of Rs.2,000. Then the tax exemption limit is subtracted from the conveyance amount. The tax is applicable on the remaining value.
So, Rs.2000 – Rs.1600= Rs.400 will be taxable.
Alternatively, conveyance allowance is sometimes grouped with other allowances in the basic salary like the special allowance. Note that this is fully taxable.
Also read: Section 54 Of The Income Tax Act: Eligibility And Tax Exemption https://navi.com/blog/section-54-of-income-tax/
Transportation allowance for disabled people or blind/deaf individuals is Rs.3,200 per month or Rs.38,400 per year. Furthermore, a standard deduction of Rs.50,000 is applicable for physically disabled employees, as stated under the 2018 Finance Act (revised during 2019 Interim Union Budget of 2019).
Central government offers the following amounts to their employees as conveyance allowance:
|Average Monthly Commute on official duty||Travel by own vehicle (in Rs.)||Travel by other modes of transportation (in Rs.)|
|201 – 300 kms||1,680||556|
|301 – 450 kms||2,520||720|
|451 – 600 kms||2,980||960|
|601 – 800 kms||3,646||1,126|
|801 kms and more||4,500||1,276|
Consolidated travel allowances are generally offered to government employees who travel for work often. This travel refers to outstation trips due to office duty. Moreover, it substitutes other travelling allowances for commuting within government officials’ duty limits.
Furthermore, a government employee can withdraw travel compensation all year long, even when they are not reporting at the headquarters. However, employees cannot withdraw during instances like temporary transfers or leave.
Conveyance allowance permits an individual to claim exemption on taxes from one’s remuneration. However, there are other ways to lessen the tax liabilities. These methods include:
Life Insurance: life insurance plans offer many tax benefits to individuals. When an individual pays life insurance premiums, he or she is allowed to claim tax deductions on salary. However, this deduction should be up to Rs. 1.5 lakh. Furthermore, as stated under Section 10(10A), if the premium is within 10% of the sum assured, individuals can claim tax benefits on the amount received upon maturity.
Health Insurance: One can claim tax deductions on premiums paid for health insurance under Section 80D of the Income Tax Act. The deduction limit is Rs. 25,000 and Rs. 50,000 for senior citizens. Individuals can buy health insurance for their parents if they are senior citizens. This way, they will end up saving a lot on taxes.
Home Loan: Applying for home loans allows an individual to save expenses on taxes. However, the individual who has applied for a loan will need to pay for EMIs to repay the loan amount and its interest.
PPF & ELSS: According to Section 80C of Income Tax Act, investment in PPF and ELSS schemes allows tax benefits to individuals who invest in them. Moreover, the minimum tax deduction limit is Rs. 1.5 lakh.
Most employees are offered conveyance allowance. However, it is taxable only if it crosses the exemption limit. It is similar to other allowances like special, housing, etc., that help in meeting employees’ expenditure. Moreover, it is an addition to the employee’s basic salary.
It is not compulsory to pay conveyance allowance to employees if the company provides transportation facilities to its employees.
No, an individual can only claim Rs. 50,000 of standard deduction. However, one cannot claim allowances like conveyance allowance and medical allowance at the same time.
The following employees are ineligible for conveyance allowance:
Central government employees who are provided government or staff transport facilities
An employee who has been absent from duty for an entire month
Conveyance allowance is a part of gross salary, and it is provided in addition to the basic salary. One can add conveyance allowance with other components of gross salary such as HRA, PF, etc., to calculate gross salary.
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
|Section 145A||Section 80P||Section 92CD|
|Section 281||Section 32(2)||Section 270A|
|Section 1399||Section 192A||Section 11|
|Section 35AD||Section 80C||Section 32|
|Section 206AA||Section 92E||Section 9|
|Section 153||Section 10(10D)||Section 194DA|
|Section 10AA||Section 80GG||Section 80TTB|
|Section 80JJAA||Section 1940||Section 23B|
|Section 206AB||Section 44AB||Section 87A|
|Section 115JB||Section 154||Section 194D|
|Section 194J(1)(ba)||Sectio 80U||Section 194K|
|Section 56-59||Section 80TTA||Section 234C|
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