Conveyance Allowance Meaning, Calculation & Exemptions

Many organizations offer various special allowances as part of an employee's compensation package, and one common type is the conveyance allowance. But what is this conveyance allowance? And why is it important for you?

This article will explain to you the basics of conveyance allowance in India. So, keep reading to learn the exemption limit, calculation methods, and relevant regulations.

What is Conveyance Allowance?

Conveyance allowance is also known as Transport Allowance. It is a financial perk offered by some employers to their staff to help cover the costs of daily commuting to and from work. This allowance recognizes that employees incur expenses on transportation, whether it's local conveyance modes like public buses, trains, taxis, or even personal vehicles. It's typically offered when the employer doesn't provide transportation services. 

Allowances are added to the base salary and may or may not be taxable depending on the Income Tax Act. The Central Board of Direct Taxes (CBDT) governs the key features of this allowance and has the authority to periodically adjust the exemption limit and other relevant regulations.

In India, conveyance allowance enjoys a tax exemption of ₹19,200 annually.

Spotting it on Your Pay Slip:

Look for an entry labeled "Conveyance Allowance" or "Transport Allowance" (TA) on your monthly salary slip. This amount is distinct from your base salary.

Conveyance Allowance Exemption Limit for AY 2024-25

The primary section associated with the conveyance allowance exemption in the Income Tax Act, 1961 is  Section 10(14)(ii).

A company can offer its employees any amount of conveyance allowance. However, the Income Tax Act sets a limit on the amount eligible for exemption, as detailed below:

Special Exemptions for Conveyance Allowance

1. The tax exemption limit for conveyance allowance for visually impaired or orthopedically handicapped individuals is ₹3,200 per month.
2. According to Section 10(45) of the Income Tax Act, UPSC members are exempt from paying tax on conveyance allowance.

As per the Central Board of Direct Taxes (CBDT) rules, employees are not required to submit any documentation such as receipts or pay slips to prove receipt of conveyance allowance when filing their income tax returns.

How to Calculate TA in Salary?

There is no fixed method for calculating the conveyance allowance deduction you can claim in a financial year. For salaried individuals, the maximum allowable deduction is ₹1,600 per month or ₹19,200 per annum, which can be subtracted from the taxable income.

If you receive additional special allowances, these can be combined with your conveyance allowance for tax deduction purposes.

Travel Allowances for Central Government Employees

TA: Points to Remember while Filling ITR

1. Form 16: The conveyance allowance and the taxable portion after exemption are detailed in Form 16, which is provided by the employer. This form is crucial for employees when filing their income tax returns.
2. Income Tax Return (ITR): While filing your ITR, ensure that the exempt and taxable portions of the conveyance allowance are accurately reported under the "Income from Salary" section.

Conclusion

Conveyance allowance is an advantageous part of the salary structure, helping employees cover commuting expenses. With knowledge of the conveyance allowance exemption limit, you can claim the appropriate exemption when filing your returns. This tax benefit is available regardless of whether you are filing under the old or new tax regime.

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