The extra allowance given by companies to its employees to compensate for their travel between their work location and residence is known as Conveyance Allowance. This amount may or may not be taxable under the tax laws of the country.
What is Conveyance Allowance?
Conveyance allowance, also called Transport Allowance is a type of allowance offered to employees of a company to compensate for their travel from residence to and from respective workplace location. Allowances are generally offered to employees on top of their basic salary component and may or may not be taxable as per the Income Tax Act.
In general, conveyance allowance is paid by an employer only if the there is no transportation provided by the employer. In case an employer offers office transport, conveyance allowance will not be provided to employees.
Conveyance Allowance Limit for FY 2020-21 & AY 2021-22
There is no limit on the amount of conveyance allowance a company can offer to its employees. However, there is a limit on the amount of exemption under the Income Tax Act as detailed below.
Latest Update: New tax regime permits IT exemption on conveyance allowance
Conveyance Allownace Exemption
Conveyance allowance is given an exemption of up to Rs.19,200 per annum or Rs.1,600 per month. The sections under which this exemption is applicable are Section 10(14)(ii) of Income Tax Act and Rule 2BB of Income Tax Rules.
Before April 2015, the conveyance allowance taxation exemption limit was capped at Rs.800 per month or Rs.9,600 per annum. The exemption limits were extended to Rs.1,600 per months or Rs.19,200 per year in Budget 2015 with an eye to provide tax benefits to the middle class taxpayers in the country.
You do not need to furnish any documents or proof of receiving conveyance allowance from your employer. The full amount of Rs.1,600 per month can be claimed as tax exemption under travel or conveyance allowance.
Special Exemption Cases
- For the blind or orthopedically handicapped individuals, the exemption limit is Rs.3200 per month.
- UPSC members do not have to pay tax on conveyance allowance as per Section 10(45) of the Income Tax Act.
How to Calculate Conveyance Allowance?
There are no complicated calculations involved in calculating conveyance allowance limit. The limits are absolute at Rs.1,600 per month or Rs.19,200 per year irrespective of the tax bracket an individual falls into.
A point to note here is that the exemption for conveyance allowance can be grouped with some other allowances, for instance Special Allowance. So, if your employer is offering you a Special Allowance of Rs.5,000 per month which is fully taxable, you can substitute Rs.1,600 as conveyance allowance and claim tax exemptions for the same. However, you should only do this after consultations with your personal tax advisor.
What is the Conveyance Allowance for Handicapped People?
Handicapped people used to receive a higher limit of Rs.1,600 per month or Rs.19,200 per year as conveyance allowance before April 2015 as compared to other categories of taxpayers. However, Budget 2015 made the exemption limit uniform across all categories of taxpayers at Rs.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 | Rs.1,680 | Rs.556 |
| 301 - 450 km | Rs.2,520 | Rs.720 |
| 451 - 600 km | Rs.2,980 | Rs.960 |
| 601 - 800 km | Rs.3,646 | Rs.1,126 |
| More than 800 km | Rs.4,500 | Rs.1,276 |
Consolidated Travelling Allowance
A permanent monthly traveling allowance may be granted by a competent authority to any
government servant whose duties require him/her to travel extensively. Such an allowance shall be in lieu of all other forms of travelling allowance for journey within the Government servant’s sphere of duty and may be drawn all the year round, whether the Government servant is absent from his headquarters or not. A permanent travelling allowance shall not be drawn during leave, temporary transfer, or joining time or, unless otherwise expressly provided in the rules in this chapter, during any period for which travelling allowance of any other kind is drawn.
Conveyance Allowance FAQs
- How much exemption can I claim on conveyance allowance?
- Are there any special cases where exemption limits can be higher?
- What is the conveyance allowance provided to central government employees who travel by their own vehicle?
- What is the conveyance allowance provided to central government employees who travel through public transport?
Exemption on conveyance allowance can be claimed under Section 10(14(ii)) of the Income Tax Act. The maximum amount that can be claimed in a year is Rs.19,200 (Rs.1,600 per month).
Individuals who are blind or orthopedically handicapped can claim an exemption of Rs.3,200 per month as opposed to the regular exemption of Rs.1,600 per month.
Central government employees who travel using their own motor car are offered Rs.1,680 if the distance is between 201 and 300 km, Rs.2,520 if the distance travelled is between 301 and 450 km, Rs.2,980 if the distance travelled is between 451 and 600 km, Rs.3,646 if the distance travelled is between 601 and 800 km, and Rs.4,500 if the distance travelled is more than 800 km.
Central government employees who travel using other modes of transport will be offered Rs.556 if the distance is between 201 and 300 km, Rs.720 if the distance travelled is between 301 and 450 km, Rs.960 if the distance travelled between 451 and 600 km, Rs.1,126 if the distance travelled is between 601 and 800 km, and Rs.1,276 if the distance travelled is more than 800 km.
