The allowance is paid to an employee to compensate for the travel they have to undertake from their residence to the workplace.
The amount payable as an allowance depends on how far an employee has to travel, and the modes of transportation used. The greater the distance that has to be covered by the employee, the higher the amount payable as conveyance allowance.
It must be borne in mind that some organisations arrange for their own transportation facilities that take their employees to and from their workplace and residence. Such organisations do not pay any extra allowance for conveyance.
What is Conveyance Allowance?
Conveyance Allowance, also called Transport Allowance is a type of allowance offered to employees of a company to compensate for their travel from residence to and from respective workplace location. Allowances are generally offered to employees on top of their basic salary component and may or may not be taxable as per the Income Tax Act.
In general, conveyance allowance is paid by an employer only if there is no transportation provided by the employer. In case an employer offers office transport, conveyance allowance will not be provided to employees.
Conveyance Allowance Exemption
Beyond a specified threshold, this allowance is taxable. These limits are governed by rules set down under Section 10(14) (ii) of the Income Tax Act of 1961 plus Rule 2BB of extant IT rules.
Before 2015, the maximum amount that would not draw any tax was set at Rs. 800 each month or Rs. 9,600 a year. After April 2015, the Union Government raised the ceiling for such allowances starting from FY 2015-16. This was declared in the 2015 Union Budget and later passed as a law by both Houses of the Parliament.
The current conveyance allowance exemption is Rs. 1,600 each month or Rs. 19,200 a year. As is obvious, it is double the previous limits set.
The revised rate of this allowance was introduced to alleviate the tax load borne by huge sections of salaried, middle-class Indians each year.
It must be noted that an employee does not need to provide any documents, receipts, pay-slips or any other proof that she/he has received conveyance allowance from employers. The IT Department will automatically consider the Rs. 1,600 limit each month- or Rs. 19,200 every year- when calculating tax liabilities for salaried individuals.
Conveyance Allowance Exemption Limit for AY 2023-24
There is no limit on the amount of conveyance allowance a company can offer to its employees. However, there is a limit on the amount of exemption under the Income Tax Act as detailed below:
Conveyance allowance is given an exemption of up to Rs.19,200 per annum or Rs.1,600 per month. The sections under which this exemption is applicable are Section 10(14)(ii) of Income Tax Act and Rule 2BB of Income Tax Rules.
Before April 2015, the conveyance allowance taxation exemption limit was capped at Rs.800 per month or Rs.9,600 per annum. The exemption limits were extended to Rs.1,600 per months or Rs.19,200 per year in Budget 2015 with an eye to provide tax benefits to the middle class taxpayers in the country.
You do not need to furnish any documents or proof of receiving conveyance allowance from your employer. The full amount of Rs.1,600 per month can be claimed as tax exemption under travel or conveyance allowance.
Special Exemptions and Provisions
There are provisions in place which grant a higher level of exemption to certain individuals. The categories include the following –
- Employees who are visually impaired or otherwise physically handicapped, conveyance allowance deduction is set at Rs. 3,200 each month. This relief is applicable regardless of whether the organisation is operated privately or publicly.
- Under Section10 (45) of the Income Tax Act, no UPSC member is liable to pay tax on conveyance allowance.
Travel Allowances on Central Government Employees
In mid-2017, the Ministry of Finance released a revised list of allowances and grants for Central Government employees. This was linked directly to the implementation of the 7th Pay Commission or 7 CPC.
While there are still some persisting issues regarding the 7 CPC, especially in the Armed Forces, HRA and travel allowance levels for all Central employees were modified.
However, many states still pay their employees under the provisions of the 6th Pay Commission. Thus, there is some difference between conveyance allowance provisions between Central cadre and State cadres.
Uttar Pradesh was one of the first states to implement and restructure all emoluments under the 7 CPC.
Given below are the latest allowances for Central Government employees.
| Average distance covered each month when on duty | Allowance for using personal conveyance like cars | Allowance for all other travel modes |
| 201 to 300 km | Rs. 1,680 | Rs. 556 |
| 301 to 450 km | Rs. 2,520 | Rs. 720 |
| 451 to 600 km | Rs. 2,980 | Rs. 960 |
| 601 to 800 km | Rs. 3,646 | Rs. 1126 |
| Any distance greater than 800 km | Rs. 4,500 | Rs. 1276 |
For Government employees who have to travel extensively, there is also a provision of a consolidated travelling allowance. Unlike other forms of this grant, a consolidated amount can be drawn around the year
How to Calculate Conveyance Allowance?
There are no complicated calculations involved in calculating conveyance allowance limit. The limits are absolute at Rs.1,600 per month or Rs.19,200 per year irrespective of the tax bracket an individual falls into.
A point to note here is that the exemption for conveyance allowance can be grouped with some other allowances, for instance Special Allowance. So, if your employer is offering you a Special Allowance of Rs.5,000 per month which is fully taxable, you can substitute Rs.1,600 as conveyance allowance and claim tax exemptions for the same
FAQs
How much exemption can I claim on conveyance allowance?
Exemption on conveyance allowance can be claimed under Section 10(14(ii)) of the Income Tax Act. The maximum amount that can be claimed in a year is Rs.19,200 (Rs.1,600 per month).
Are there any special cases where exemption limits can be higher?
Individuals who are blind or orthopedically handicapped can claim an exemption of Rs.3,200 per month as opposed to the regular exemption of Rs.1,600 per month.