Conveyance allowance is a benefit provided to employees to reimburse them for travel costs between their place of residence and place of employment. Read about the exemption of conveyance allowance for AY 2023-24 here
Conveyance Allowance Exemption is a benefit provided to employees to reimburse them for travel costs between their place of residence and place of employment. You may be confused about how conveyance allowances function and how much money should be allocated for them as a company or HR manager. Employers frequently provide their staff with a variety of benefits. Know more on Conveyance Allowance Exemption.
Only if the corporation does not offer transportation facilities to the employees does offering a salary conveyance allowance become necessary. However, if the company provides transportation, there is no payment for the service regardless of whether the employees use it.
Conveyance Allowance Exemption is the term used for the allowance provided by employers to their employees to cover their travel expenses between their residence and workplace. The amount of allowance provided may be taxable according to the Income Tax Act of India, depending on whether it falls below or above the exemption limit.
Meaning Of Conveyance Allowance
Conveyance allowance, often known as transport allowance (less accurately), is a benefit provided to employees to reimburse them for travel costs between their residence & employment area. Idealistically, this stipend is given besides one’s base pay. The Income Tax Act of India may or may not apply, as well. The amount of the conveyance reimbursement determines the tax bracket.
Conveyance Allowance Exemption Features
Here are a few important features of the Conveyance allowance exemption:
- The conveyance allowance limit for salaried individuals is ₹ 1,600 per month or ₹ 19,200 per year.
- Companies that offer transportation services do not pay conveyance allowance.
- Conveyance allowance may vary based on the employer or employee’s designation, but the tax exemption limit is ₹ 1,600 per month or ₹ 19,200 per year.
- Salaried individuals do not need to provide bills or receipts to avail conveyance allowance.
- Conveyance allowance can be combined with other allowances, such as Special Allowance, to claim tax exemptions.
- A competent authority can grant a consolidated travelling allowance to an employee who travels frequently, in place of conveyance allowance or other travel allowances.
- The employee cannot receive this travelling allowance during leave, temporary transfer, etc.
Usually, a conveyance allowance gives on the understanding that the employer will not provide transportation. The following are key aspects of the conveyance allowance exemption:
- Employees who receive transportation services from their employers are not required to receive a conveyance allowance.
- Salaried individuals are not required to provide permits/ bills to show they receive a transportation allowance.
- Employees receive different transport allowances from different companies, but all employees are eligible for tax exemptions.
- Employees earning 1,600 INR a month are Conveyance Allowance Exemption.
Conveyance Allowance Exemption Limit for AY 2023-24 & FY 2022-23
Companies are not restricted on the amount of conveyance allowance they can provide to their employees. Nevertheless, there is a limit to the amount of exemption available under the Income Tax Act, which is explained below.
Conveyance Allowance Exemption
Conveyance allowance can be exempted up to ₹ 19,200 per year or ₹ 1,600 per month under Section 10(14)(ii) of the Income Tax Act and Rule 2BB of the Income Tax Rules.
The conveyance allowance taxation exemption limit used to be ₹ 800 per month or ₹ 9,600 per annum before April 2015. However, the budget of 2015 extended the exemption limit to ₹ 1,600 per month or ₹ 19,200 per year to offer tax benefits to middle-class taxpayers in India.
You are not required to provide any documentation or evidence of receiving conveyance allowance exemption from your employer. The entire sum of ₹ 1,600 per month can be declared as a tax exemption for travel or conveyance allowance exemption.
The transport allowance exemption provided to employees is unrestricted and uncapped. The Income Tax Act of India places limitations on tax exemption. According to Section 10(14) of the Act of Income Tax and 2BB rule of the Income Tax Rules, the maximum monthly Conveyance Allowance Exemption amount is 1,600. (or, 19,200 annually). Prior to April 2015, the exemption from income tax for the conveyance allowance was limited to INR 800 per month (or, INR 9,600 annually). These exemption thresholds were increased in the 2015 Budget to lessen the tax burden on middle-class taxpayers.
Special Exemption Cases
- Blind or orthopedically handicapped individuals have an exemption limit of Rs. 3200 per month.
- Members of UPSC are exempt from paying tax on conveyance allowance under Section 10(45) of the Income Tax Act.
Conveyance Allowance Exemption from Tax
As per the latest rules by the Income Tax department of India, a standard exemption of ₹ 50,000 is applicable on gross salary. However, there is no separate exemption for conveyance allowance. If a company provides conveyance allowance, it is excluded from ESI calculation.
How to Calculate Conveyance Allowance Exemption?
The tax exemption limit for conveyance allowance is ₹ 1,600 per month, regardless of the employee’s income tax bracket. In case an employee receives a taxable special allowance, they can replace ₹ 1,600 with it as a conveyance allowance to claim tax exemption.
Any allowance exceeding this limit is considered as a part of an individual’s taxable income under the ‘salaries’ category and is taxed according to their applicable income tax slab.
To illustrate, suppose ABC Company provides a monthly special allowance of ₹ 6,000 to its employees, which is fully taxable. An employee can choose to designate ₹ 1,600 of that amount as their conveyance allowance and claim tax exemption on it. However, seeking the advice of a tax expert before making any claims is recommended.
Several Unique Exemptions
- For those who are blind or have orthopaedic disabilities, the monthly exemption from conveyance is limited to 3,200 INR.
- The conveyance allowance for UPSC members does not qualify under Section 10(45).
Important Things to Note
Listed below are the essential things to remember:
- The amount of conveyance allowance may vary across companies, but the exemption limit is fixed.
- Salaried individuals do not need to submit any additional documents to receive conveyance allowance.
- Conveyance allowance can be categorised as a special allowance.
- Employers do not provide conveyance allowance if they offer transportation facilities.
- Government employees receive a consolidated travel allowance that replaces all other allowances for official transportation.
What is the Conveyance Allowance for Handicapped People?
Before April 2015, the exemption limit for conveyance allowance for handicapped individuals was higher at ₹ 1,600 per month or ₹ 19,200 per year, compared to other taxpayers. However, with the implementation of Budget 2015, the exemption limit was made uniform for all categories of taxpayers at ₹ 1,600 per month.
Latest Information on Conveyance Allowances for Central Government Employees
| Average monthly travel when on official duty | Travel by own car | Travel by other modes of conveyance |
| 201 – 300 km | ₹1,680 | ₹556 |
| 301 – 450 km | ₹2,520 | ₹720 |
| 451 – 600 km | ₹2,980 | ₹960 |
| 601 – 800 km | ₹3,646 | ₹1,126 |
| More than 800 km | ₹4,500 | ₹1,276 |
Some of the common allowances have been discussed here:
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House Rent Allowance (HRA):
House Rent Allowance (HRA) is an allowance given by a company to cover accommodation expenses for its employees. The exemption on HRA can be claimed by employees under Section 10(13A) of the Income Tax Act (1961), following Rule 2A of the Income Tax Rules. Salaried employees are required to furnish rent receipts as evidence to claim the HRA tax benefit. Self-employed individuals are not eligible for HRA exemption but can claim tax deductions under Section 80GG. Individuals, both salaried and self-employed, who reside in their own property, are not eligible for HRA tax exemption.
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Leave Travel Allowance (LTA):
Leave Travel Allowance (LTA) is an allowance that an employer pays to their employee for travel expenses when the employee travels alone or with their family within the country. The exemption for LTA can only be claimed twice in four years. It is a beneficial tool for tax-saving as per Section 10 (5) of the Income Tax Act, 1961, and Rule 2B. Expenses like food, shopping, and other miscellaneous expenses are not included in LTA. While it is not mandatory to provide documentary proof of travel, the assessing officers may demand it during the assessment.
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Dearness Allowance (DA):
Dearness Allowance (DA) was introduced after World War II to help people cope with inflation. It is a fixed percentage of an employee’s basic salary, with the percentage varying based on the location of the employee, as the cost of living in India differs for city, town, and village residents. DA is revised twice a year, in January and July, and is typically paid to public-sector employees. It is fully taxable along with the salary and needs to be reported by salaried individuals in their tax returns each financial year.
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Medical Allowance:
A fixed monthly allowance paid by a company to its employees is taxable. Salaried individuals can claim tax benefit on medical reimbursement up to ₹ 15,000 by submitting necessary bills and documents as proof. If proof is not submitted, 30% of ₹ 15,000 can be reclaimed while filing tax returns. Medical reimbursement falls under Section 80DD of the Income Tax Act (1961). The employer is liable to pay TDS penalties if TDS is not deducted on medical allowance and reimbursement is not claimed.
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Special Allowance:
Special Allowance is a type of allowance that a company pays to its employees to cover specific work-related expenses that are not included in any other allowance category. It is tax-exempt up to the amount of actual expenses incurred for carrying out official duties. There is no set maximum limit for this allowance. It is paid on a monthly basis and is subject to taxation.
Conveyance Allowance in India
Conveyance Allowance is the additional amount given by employers to their employees to cover their commuting expenses between their workplace and home. Whether this allowance is taxable or not depends on the tax laws of the country.
What Formula is Used to Determine the Taxable Conveyance Allowance?
The basic pay is used to calculate the Conveyance Allowance Exemption. Regardless of the employee’s tax category, the tax threshold for exemption is fixed at 1,600 INR every month. The tax on conveyance exemption can only offset INR 1,600 of an organization’s monthly allotment of INR 5,000 (which is 100% taxable).
This also applies to people who get exceptional, fully taxed allowances. The employee can then use INR 1,600 from this conveyance in place of the reimbursement for conveyance and claim a tax exemption.
Are the Transport Allowance and the Conveyance Allowance Distinct?
There is no distinction between the two categories of allowances. However, larger businesses may compensate select employees for other work-related travel endeavours, such meetings or conferences, besides providing all of their employees with reimbursement for travel to and from the workplace. Employers want to distinguish between these two categories of allowances in such circumstances. In these situations, the allowance granted to cover the costs of a round-trip commute between the office and the residence is the transport allowance. Conveyance Allowance Exemption then turns into the payment made to other workers to cover their transportation costs for work-related activities or reasons.
Conveyance Allowances For Federal Government Employees
For those who work in government agencies, there are different restrictions regarding the conveyance allowance. All government workers who must travel for work frequently receive compensation. When a person is travelling on business and stays within the bounds of their official duties, this stipend takes the place of other travel benefits. Even when the signing authority is not there right away, government workers are still eligible to receive a permanent travel allowance for the full year.
However, unless specifically stated in the fully signed guidelines, they will not be permitted to draw the allowance while on leave or during a temporary transfer.
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Combined Travel Allowance
A competent authority may give a merged travel allowance to any public servant who frequently travels for business. This reimbursement will take the place of other types of travel reimbursements for transit within the official’s scope of duty. However, unless specifically allowed in the chapter regulations, it cannot draw during situations like temporary transfers or leaves of absence or any other time when a different type of travel reimbursement is being received.
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Disability Conveyance Allowance
In India, disabled people are entitled to INR 3,200 per month or INR 3,200 per year in transportation allowances. The standard deduction of INR 50,000 is not available to employees who are physically handicapped under the Finance Act of 2018 and the Interim Budget of 2019.
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Central Government Employees’ Conveyance Allowance Exemption
Salaried workers may now claim an exemption if they elect to file for lower personal income tax slabs that include exemptions on transportation benefits provided by employers, thanks to recent changes to the income tax laws announced by the Central Board of Direct Tax.
This new, optional tax regime will apply to income received beginning with the fiscal year. The addition of the additional clause has followed the regime for the application of these exemptions to 2BB rule. Irt comprises those given to cover travel expenses for transfers or tours, those given to cover daily expenses incurred by an employee while away from their usual place of employment, and those given to cover transportation costs incurred while performing duties only where the employer is not offering the employee free transportation. The announcement also exempts physically challenged personnel from paying transportation expenses up to a maximum of 3200 INR every month.
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Conveyance Allowance Exemption Deduction For AY 2023- 24
Besides the conveyance allowance exemption, which exempts your taxable income (salary) from tax, there are other options for reducing your tax obligation. These include:
- Plans for life insurance provide useful tax advantages. Upto INR 1.5 lakh of the premiums paid may be deducted from taxable income under Section 80C. The death benefit of the policy is entirely tax-free. Section 10 allows you to claim a tax deduction if your premium was within 10% of the sum assured.
- Health insurance plans are also tax deductible. Section 80D of the Internal Revenue Code allows for tax-free deductions for health insurance premiums. The maximum deduction is INR 25,000 for normal taxpayers and INR 50,000 for senior citizens. You may deduct more funds if you get health insurance for your parents. The maximum deduction would likewise be INR 25,000 or INR 50,000, depending on your parents’ ages.
- Contributions to the PPF plan, NSC, SSY, SCSS, 5-year fixed deposits, and so on are also tax deductible under Section 80C, up to a ceiling of INR 1.5 lakhs.
- ELSS mutual fund programmes permit tax advantages on investments made under Section 80C regulations.
- According to Section 80C, the loan principal you repay is deductible as a business cost. Sections 24(b) and 80EEA both allow the use of paid interest as a tax-free item. However, the deduction under Section 80EEA is subject to a few conditions.
Examine your wages to see whether your employer gives a transport allowance. If your employer does, you may reduce your tax liability by claiming a tax exemption on the amount.
Conclusion
A transportation allowance exemption is provided to workers of the firm to recompense them for their journey from their home to and from work. Any amount paid in excess of the Conveyance Allowance Exemption limit is taxed under the heading Income from Salaries. Vakilsearch provides noteworthy and important information in the same, so if you want to know more about this, connect with this platform.
Frequently Asked Questions on Conveyance Allowance Exemption
Can I avail Conveyance Allowance if I do not use the company provided transportation service?
If an employer provides transportation services to its employees, the company will not provide a conveyance allowance, regardless of whether the employee uses the service or not.
Can I get a tax exemption on my conveyance allowance?
You can avail a tax exemption of ₹ 1,600 per month or ₹ 19,200 per annum as conveyance allowance irrespective of the tax slab your income belongs to. This exemption limit is set under Section 10 sub-section 14(ii) of the Income Tax Act (1961) and Rule 2BB of the Income Tax rules. Although the tax exemption limit may change over time, it is currently fixed at ₹ 1,600 per month for all salaried employees.
How can I calculate my Conveyance allowance to avail tax benefits?
Conveyance allowance is an additional amount paid by the employer along with the basic salary to assist you with your transportation costs to work. Calculating it is straightforward, as you can review the conveyance allowance paid to you during the year and add it up. Currently, the tax exemption limit for conveyance allowance is set at ₹ 1,600 per month or ₹ 19,200 per annum.
How can I calculate my Taxable income?
You can easily calculate your taxable income by checking your salary slip and including any variable income paid to you quarterly or semi-annually for the fiscal year. Simply use this formula: Taxable Income = Gross Salary – Employee Provident Fund (EPF) Contribution + Conveyance Allowance + House Rent Allowance + Leave Travel Allowance + Medical Bills + Medical Insurance + Tax
Is there a limit on the conveyance allowance an employer can pay?
There is no predetermined limit on the amount of conveyance allowance that an employer can provide to its employees. However, according to Section 10 sub-section 14(ii) of the Income Tax Act (1961), the tax exemption limit for conveyance allowance is set at ₹ 1,600 per month or ₹ 19,200 per year. Regardless of the monthly income or tax slab, a salaried individual can only claim a tax exemption of up to ₹ 1,600 per month (approximately ₹ 19,200 per year) for conveyance allowance.
How much exemption can I claim on conveyance allowance?
You can claim exemption on conveyance allowance by referring to Section 10(14)(ii) of the Income Tax Act. The highest amount that can be claimed in a year is ₹ 19,200, which is equivalent to ₹ 1,600 per month.
What is the conveyance allowance provided to central government employees who travel by their own vehicle?
Central government employees who use their own motor car for travel are provided with a specific allowance based on the distance covered. The allowance is ₹1,680 for distances between 201-300 km, ₹2,520 for distances between 301-450 km, ₹2,980 for distances between 451-600 km, ₹.3,646 for distances between 601-800 km, and ₹4,500 for distances exceeding 800 km.
Are there any special cases where exemption limits can be higher?
People who are blind or have orthopedic disabilities are eligible for an increased monthly exemption of ₹ 3,200 instead of the standard exemption of ₹ 1,600.
Are there specific conditions or criteria that must be met for conveyance allowance to be tax-free?
The allowance must be paid by an employer to an employee as part of their salary. The allowance must specifically be designated as conveyance allowance. The employee must use the allowance for their official travel expenses. The exempt amount cannot exceed Rs. 1,600 per month or Rs. 19,200 per year.
How is conveyance allowance different from other allowances like house rent allowance (HRA) in terms of taxation?
Purpose: Conveyance allowance covers travel expenses, while HRA covers rent paid for residential accommodation. Conveyance allowance Exemption limits: Conveyance allowance has a fixed exemption limit, while HRA exemption depends on various factors like city type and salary. Proof of expenses: Conveyance allowance exemption generally doesn't require proof of expenses, unlike HRA which requires rent receipts
Is there a need for submitting bills or proof of expenses to claim tax exemption on conveyance allowance?
It's generally not mandatory to submit proof of expenses. However, maintaining records like travel receipts for official trips could be helpful in case of scrutiny by tax authorities.
Can self-employed individuals or professionals claim tax benefits on conveyance expenses?
Self-employed individuals can claim actual travel expenses incurred for business purposes as a deduction from their taxable income. However, they cannot claim a separate conveyance allowance exemption.
In case an employer provides transport facilities, does it impact the tax treatment of conveyance allowance?
If an employer provides free transportation, the entire conveyance allowance becomes taxable. However, if the provided transport only covers part of the employee's travel needs, the remaining amount within the exempt limit can still be considered tax-free.
