Transport Allowance or Conveyance Allowance is a part of the salary structure which is given to the employees by the employer to compensate for travel expenses incurred while commuting between workplace and residence. This part of allowance is provided only when an employer does not provide pick and drop facility to its employee.
Conveyance Allowance of up to Rupees 19,200 per annum or Rupees 1,600 per month is exempted from being taxed under Section 10 (14) (ii) of Income Tax Act and Rule 2BB of Income Tax Rules. Earlier, the Conveyance Allowance Tax exemption was Rupees 800 per month but it was later revised in 2015 to benefit middle-class taxpayers in India. For availing Conveyance Allowance an employee is not required to furnish any document as proof to the employer.
There are no complicated calculations for calculating the limit of Conveyance Allowance. The limit set is the same for all salaried employees and it has no relevance with an employee’s tax bracket. In some cases, the Conveyance Allowance amount can be combined with some other allowances, like with Special Allowance.
For example, if an employer is providing a Special Allowance of Rupees 5,000 per month (which is 100% taxable), out of the total of Rupees 5,000, Rupees 1,600 can be allotted as the Conveyance Allowance, upon which tax exemptions can be claimed. It is however highly advisable to consult a tax expert before proceeding with the tax exemption claim on Transport Allowance.
Individuals who have disabilities associated with orthopedic conditions are eligible to avail Transport Allowance which is quite different from the normal Conveyance Allowance allotted to the general employee. For the general employee, the Conveyance Allowance is usually half of that given to individuals with disabilities.