Taxability on Conveyance Allowance
I am receiving an amount from my employer as conveyance allowance. It is taxable?
Why conveyance allowance is granted to an employee
Naturally for supporting him to use
the amount for conveyance for reaching at the point of location of office and
after office, reach at the point of residence. In other words, it is an amount
paid apart from the basic salary so that an employee can use the transportation
for reaching to his duty place. It is expected from an employer to provide
transportation facilities to the employees so that they can be picked from
their residence to the place of duty or office.
“Conveyance Allowance (also known as
Transport Allowance) is provided by employer to employee for meeting employee
transportation cost from residence to workplace.”
It is a reimbursement or not?
Since the employees are not asked to
provide any bill or receipt of the expenses made for transportation, it cannot
be considered as a reimbursement.
Whether the Conveyance Allowance is exempt or not?
The exemptions on allowances are
mentioned in Section 10 of Income Tax Act. For each exemption, there is need to
produce bills / receipts / certificates / affidavits on demand of income tax
department or deductors.
Section 10 (14) (i) states that the
amount will not form the part of total income related to “any such special
allowance or benefit, not being in the nature of a perquisite within the
meaning of clause (2) of section 17, specifically granted to meet expenses
wholly, necessarily and exclusively incurred in the performance of the duties
of an office or employment of profit, [as may be prescribed], to the extent to
which such expenses are actually incurred for that purpose”.
Tax on Conveyance Allowance prior to FY 2017-18:
Further Rule 2BB states that any
allowance granted to meet the expenditure incurred on conveyance in performance
of duties of an office or employment of profit, provided that free conveyance
is not provided by the employer.
Now it is clear that the conveyance
allowance is exempt but there is limit of this allowance to be exempt i.e. Rs.
1600 per month or Rs. 19,200 per annum. It does not mean that the employer
cannot pay more than Rs. 1600 per month. Employers can pay whatever they seem
proper but in case, the amount of conveyance allowance is more than Rs. 1600
per month, that excess amount will be taxable in the hands of the employee.
Tax on Conveyance Allowance from FY 2017-18 onwards:
It is important to note that this
exemption was up to Financial Year 2017-18 and thereafter, decision was taken
to provide Standard Deduction to the salaried persons and make the amount of
conveyance allowance fully taxable.
Tax on Conveyance Allowance if New Tax Regime adopted (from FY 2020-21):
In case, any employee opts for the
New Tax Regime having flat tax rates without deduction and exemptions. In this
case, the person will not get the Standard Deduction which is provided to old
tax regime taxpayers; therefore the amount of conveyance allowance will be exempt.
Conveyance Allowance to physically challenged employees:
In case, any employee is physically
challenged such as blind or deaf or dumb or orthopedically handicapped then the
conveyance allowance will be exempt up to Rs. 3200 per month. This benefit is specially
to meet the cost of travelling for the physically handicapped employee as he
may face more problems than the ordinary person.
Is there any difference between Transport Allowance and Conveyance Allowance?
The Conveyance Allowance is to ensure
convenience of an employee, means it is an allowance to meet the day to day
expenses on conveyance in performance of official duty. While the transport
allowance is particularly to meet expenses incurred to move from place of
residence to place of official duty i.e. transportation expenses.
