Conveyance allowance or transport allowance is given by the company or an employer to the employees to compensate them for the expenses of their commute between their residence and the workplace. Let’s learn more about conveyance allowance and how the exemption works.
Things You Should Know About Conveyance Allowance
- A company mostly only offers conveyance allowance if a transportation facility is unavailable for the employees, irrespective of whether or not the employees utilize the facility.
- There are no set limitations on the amount of conveyance allowance that a company can pay to the employee.
- To get a conveyance allowance, salaried individuals don’t have to present any receipts.
- This additional allowance is paid on top of the basic salary and is only taxed if it crosses the exemption limit.
- The conveyance allowance falls under the jurisdiction of the Central Board of Direct Taxes (CBDT), which is a statutory body that amends the existing rules periodically.
Amendments to Conveyance Allowance Rules
From the financial year, 2021-22, a few amendments have been made to conveyance allowance. A subsection has been added to Rule 2BB of the Income Tax Rule, which allows allowances for the following:
- Meet traveling expenses while the employee is on a tour or transfer
- Meet daily expenses incurred by the employee when they are not in their regular place of work
Conveyance Allowance Exemption Limit for AY 2023-24
Irrespective of the tax bracket that the employee falls under, conveyance allowance is exempt from taxes up to a specific limit.
| Conveyance allowance for commuting between the workplace and residence for salaried individuals | Rs. 19,200 per year or Rs. 1,600 per month |
|---|---|
| Conveyance charges for commuting between the workplace and residence for physically disabled or handicapped employees | Rs. 38,400 per year or Rs. 3,200 per month |
| Conveyance charges for the employees who are in the transport business for personal expenditure, during running option transport | Lower of 70% of the allowance, or Rs. 10,000 per month |
How is Conveyance Allowance Calculated?
The calculation of conveyance allowance does not follow a specific formula. It is simply based on the employee’s basic salary. There is no prescribed limit on the amount of conveyance expenses that a company can provide to its employees. However, if the amount exceeds the exemption limit, it becomes taxable.
Let’s take an example to understand this better. If a company provides a conveyance allowance of Rs. 10,000 to an employee, only Rs. 1,600 of that amount will be exempt from taxation. The remaining Rs. 8,400 will be subject to taxation.
Also Read: What is Dearness Allowance (DA)?
Conveyance Allowance for Government Employees
The conveyance allowance for employees of the central government of India can be classified as below-
| Average distance traveled by the employee for official duty per month | If the employee travels by their vehicle | If the employee uses other modes of transportation |
|---|---|---|
| 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 |
| Over 800 km | Rs. 4,500 | Rs. 1,276 |
Conveyance allowance is paid by employers to their employees only if there are no company transportation facilities available. This allowance is calculated as a part of the basic salary of the employee and up to a specific amount, exempt from taxation.
Disclaimer
This blog is written to make it easy for readers to understand complicated processes. Some information and screenshots may be outdated as government processes can change anytime without notification. However, we try our best to keep our blogs updated and relevant.
