Companies usually provide special allowances to their employees as a token of appreciation for their exemplary performance. It is credited to them as a part of their salary to cover the expenses incurred while performing their official duties. Moreover, they come with tax benefits, which employees can claim while filing their returns.
One of the most common types of special allowance organisations offer is conveyance allowance. If you receive this benefit as part of your salary, keep reading this article. You will learn the conveyance allowance exemption limit, how to calculate it, and more.
What is Conveyance Allowance?
Conveyance allowance (also known as transport allowance) is a special allowance companies provide to their employees to cover their expenses while travelling to and from their workplace.
They are usually offered on top of their basic pay and are applicable for tax deductions up to a certain limit. Generally, conveyance allowance eligibility is only applicable to those employees who do not have any transportation system arranged by their employers. Furthermore, it depends on the employee’s position in the organisation.
Conveyance Allowance Exemption Limit for AY 2024-25
According to Section 10(14)(ii) of the Income Tax Act and Rule 2BB of the Income Tax Rules, salaried individuals can claim conveyance allowance that is exempted up to the actual expenditure incurred for the official purpose or the entire allowance whichever is less will be exempted.
Now, employers are not limited in the amount of conveyance allowance they provide to their employees. Moreover, the allowance amount will vary across companies, but the exemption amount will remain the same.
However, there are certain exemptions:
- The conveyance allowance tax exemption limit for visually impaired or orthopedically handicapped individuals is Rs 3,200/month.
- According to Section 10(45) of the Income Tax Act, UPSC members do not have to pay any tax on conveyance allowance.
As per Central Board of Direct Taxes (CBDT) rules, employees do not need to furnish any documents regarding this when filing their income tax returns.
How to Calculate Conveyance Allowance in Salary?
There is no specific method for calculating the amount of conveyance allowance deduction you can avail of within a financial year. If you are a salaried individual, the maximum relief available is Rs 1,600/month or Rs 19,200/annum, which you can deduct while calculating your taxable income.
In case you receive other special allowances, you can group them with your conveyance benefit to avail tax deductions.
Points to Remember when filling ITR
Form 16: The details of the conveyance allowance and the taxable portion after exemption are reflected in Form 16, provided by the employer. This form is essential for employees when filing their income tax returns.
Income Tax Return (ITR): While filing ITR, the exempt and taxable portions of conveyance allowance should be appropriately reported under the "Income from Salary" section.
Final Word
Conveyance Allowance is a beneficial component of the salary structure that helps employees manage commuting costs. Now that you know the conveyance allowance exemption limit, you can opt for an exemption accordingly while filing your returns. Furthermore, this tax relief is available regardless of whether you are filing under the old or the new tax regime.