Conveyance allowance, also known as transport allowance, is a kind of allowance offered by employers to their employees to compensate for their travel expense to and from their residence and workplace. This allowance is usually offered in addition to the basic salary, and may or may not be taxable under the Income Tax Act of India (depending on how much the employer is offering).
Companies generally offer this kind of allowance in case they do not provide transportation services to their employees. If an employer does offer such facilities, then conveyance allowance will not be paid, regardless of whether an employee has made use of or opted out of the company’s transport service.
The tax exemption limit for conveyance allowance is set at Rs. 1,600 per month, irrespective of the tax bracket a person falls under. If the individual is given a special allowance, which is fully taxable, then he or she can substitute Rs. 1,600 from it as conveyance allowance and claim tax exemption on it.
For example, if a company is offering a special allowance of Rs. 5,000 per month (100% taxable), Rs. 1,600 out of the total of Rs. 5,000 can be allocated as conveyance allowance and tax exemption can be claimed on it. However, it is advisable to first consult with a tax expert before going ahead with claiming tax exemption on conveyance allowance.
There is no restriction as to how much conveyance allowance an employer can offer its employees. However, there is a limit on the amount of tax exemption under the Income Tax Act. Under Section 10(14) of the Income Tax Act and Rule 2BB of Income Tax Rules, the conveyance allowance exemption limit is Rs. 1,600 per month (or Rs. 19,200 a year). Prior to April 2015, the taxation exemption limit was set at Rs. 800 per month or (Rs. 9,600 a year). The exemption limits were raised in Budget 2015, with the aim of reducing the tax burden of the middle-class taxpayers.
Special Exemption Cases
The exemption limit for individuals who are orthopedically handicapped or blind is Rs. 3,200 per month.
According to Section 10(45), the conveyance allowance offered to UPSC members does not attract any tax.
Some of the important features of conveyance allowance are:
The exemption limit for all salaried individuals is set at Rs. 1,600 per month.
The amount that is offered as conveyance allowance can vary from company to company. However, the tax exemption limit is uniform for all - Rs. 1,600 per month.
Companies providing transportation facilities to their employees do not offer conveyance allowance.
Salaried individuals do not have to furnish any bills or receipts to receive conveyance allowance.
Conveyance allowance can be grouped with other allowances like special allowance.
Any government employee who travels for work often can be granted a consolidated travelling allowance by a competent authority. This allowance will substitute other kinds of travelling allowances for transit in the government official's limits of duty. A permanent travelling allowance can be drawn all year round, even when the official is not present at the headquarters. It will, however, not be possible to draw during instances like temporary transfer or leave, unless expressly provided in the chapter rules during any period when travelling allowance of another kind is drawn.
What is conveyance allowance?
Conveyance allowance, also known as transport allowance, is a kind of allowance offered by employers to their employees to compensate for their travel expense to and from their residence and workplace. This allowance is usually offered in addition to the basic salary, and may or may not be taxable under the Income Tax Act of India (depending on how much the employer is offering).
What is the tax exemption limit on conveyance allowance?
Section 10(14) of the Income Tax Act and Rule 2BB of Income Tax Rules have capped the conveyance allowance exemption limit at Rs. 1,600 per month or Rs. 19,200 a year. Prior to April 2015, the taxation exemption limit was set at Rs. 800 per month or Rs. 9,600 a year.
How much conveyance allowance is offered to central government employees if they travel by their own vehicle?
The conveyance allowance offered to central government officials travelling by their own vehicle is as follows:
| Average Monthly Travel On Official Duty | For Journey By Own Motor Car |
|---|---|
| 201 - 300 km | 1,680 |
| 301 - 450 km | 2,520 |
| 451 - 600 km | 2,980 |
| 601 - 800 km | 3,646 |
| >800 km | 4,500 |
In what instance does the tax exemption limit on conveyance allowance go beyond Rs. 19,200 during a year?
Individuals who are orthopedically handicapped or blind can avail exemption on conveyance allowance of up to Rs. 3,200 per month as compared to the limit of Rs. 1,600 per month for other individuals.
How much conveyance allowance can be offered by an employer?
There is no restriction on the amount that employers can offer as conveyance allowance to their employees. However, there will be a limit on the amount of tax exemption under the Income Tax Act. The conveyance allowance exemption limit, as under Section 10(14) of the IT Act and Rule 2BB of Income Tax Rules, is capped at Rs. 1,600 per month or Rs. 19,200 a year. Prior to April 2015, the taxation exemption limit was set at Rs. 800 per month or Rs. 9,600 a year.
Do I get conveyance allowance if I opt out of the company-provided transportation service?
No, if a company is offering transportation facilities to its employees, then it will not pay conveyance allowance.
