Conveyance Allowance - Definition, Limit, Exemption and Calculation

Your monthly salary is made up of many components. Other than your Basic Salary, companies offer their employees several allowances like DA- Dearness allowance, HRA- Housing Rent allowance, Special allowances, Medical allowances, LTA –Leave Travel allowance, Conveyance/travel allowances and more. So, your gross salary is far higher than your basic pay. This amount is taxable under the Income Tax Act 1961, unless there is an exemption given in the law. 

Some of you may have a fixed or changeable amount (given on the basis of travel receipts) in your monthly salary that is supposed to take care of any money spent on travelling to the office or other work-related places. This allowance is also called Travel/ Conveyance allowance and is a part of your Gross and Take-Home salary. There is a tax exemption of up to a limit under Sec 10 (14) of the Income Tax Act and Rule 2BB of the Income Tax Rules on conveyance allowances. Let’s discover facts, definition, limits, IT exemptions, and calculation of the conveyance relief.

Conveyance Allowance Definition

Conveyance or travel allowance

It is the extra money (fixed or variable) given to employees by companies to cover any payments made for traveling to the office or any other work-related-place for official purposes. Conveyance Allowance or Transportation Allowance can be non-taxable or taxable, depending upon the income tax laws in the country. Usually this money is paid to you by the company when no pick and drop travel service is given by the organisation. However, there can be various conditions applied in different situations, and company policies.

Limits for conveyance allowance

There is no specific limit on how much conveyance allowance can be paid to the employees by a company. However, the tax exemption given under the relevant Income Tax sections is on a fixed slab. In India, the conveyance allowance exemption is limited to a total amount of Rs 1600/month or a total of Rs.19200 per year.

Exemptions for Conveyance Allowance

The Income Tax Act of 1961 has specific conveyance exemption sections which mention how much of your paid travel allowance is non-taxable. Though there is no limit on how much travel allowance you can get, only Rs 1600/month or a total of Rs.19200 per year is exempted from tax under the IT Act. Conveyance exemption u/s 10 (14) (ii) Rule 2BB, is also known as conveyance exemption in ITR 1.

Also Read: Dearness Allowance (DA)- Defination, Types & DA Calculation

How to claim conveyance allowance?

Until April 2015, the amount for conveyance allowance exemption under the IT Act was Rs.9,600 /year or Rs.800/ month. The government increased this amount in the 2015 Budget, making it Rs.19,200/ year or Rs.1,600/ month. This move gave the much-needed relief to the middle-class taxpayers of the country, who spend their hard-earned money travelling to work daily. You do not need to submit any receipts or travel documents to claim this exemption. So, you can take advantage of this exemption for conveyance allowance while filing for ITR- Income Tax Returns whether or not you have actually spent any money on travelling in a given financial year.

Exemption Special Cases

• The  travel allowance exemption for orthopedically disabled and blind individuals is different. They can claim tax exemption on Rs 38400/year or Rs.3200/ month.
• Under the Income Tax Act 1961, there is  an exemption for UPSC members. Travel allowance for UPSC members is not taxable under conveyance exemption section 10(45). 

Conveyance Allowance Calculations

Conveyance allowance taxable or not? Yes, conveyance allowance is taxable like we discussed above. However, there is no limit on how much your company can pay you in this category. As far as taxation and exemption goes, the amount is set at Rs.19200/ year or Rs.1600/ month for conveyance allowance exemption limit for AY 2021-22. It was last revised in the 2015 budget.

• Do note that there are no formulas to remember or complex calculations involved in calculating transport allowance exemption for AY 2020 – 21 while filing Income Tax returns.
• This limit of conveyance allowance for AY 2020 – 21 is absolute and fixed no matter which tax bracket you fall into.
• If your company does not pay you conveyance allowance separately, but pays a big amount as special allowances, you can still claim the Income Tax exemption on Rs 1600 a month. Below is an example to make this clear:

Say In 2019, your company paid you Special Allowances of Rs.4000 per month. This is a fully taxable amount. However, you can show an amount of Rs.1600/ month as conveyance allowance for AY 2019-20, out of the Rs 4000 which means after deducting Rs 1600, the remaining Rs 2400/month will be taxable, instead of the entire amount. This is just an example and we strongly suggest you consult a personal tax advisor before acting on this advice.Latest conveyance allowances stipulations:

Conveyance allowance under the new Income Tax regime 2020-21

The CBDT or Central Board of Direct Taxes has changed the income tax rules allowing all kinds of taxpayers and job-holders to claim conveyance allowance exemption. 

• Under the new tax rules, conveyance allowance means all travel allowances paid to you while on tour or transfer. This includes the money you spend daily on travelling when you are not at headquarters or normal duty location. 
• Any amount paid by the company to its employees against lack of a pick and drop facility comes within the scope of travel allowance exemption (partly or entirely). 
• The travel allowance exemption for disabled and blind people of Rs 3200/ month can be included in their salaries if requested by such an employee. Which essentially means that an employee with these medical conditions can ask his/her employee to add conveyance allowance as a part of their salaries. 

Conveyance Allowance for Disabled People

As a special measure, disabled were given a higher exemption limit than the normal Rs19200/ year or Rs 1600/month. Until April 2015, for disabled people, their conveyance allowance was Rs 3200/month or Rs 38400/ year before April 2015. The Budget of 2015 removed this enhanced limit and has made the exemption limit a uniform conveyance allowance exemption limit of Rs 1600/ month or Rs 19200/annum across all taxpayer categories. Hence for the disabled  conveyance allowance exemption limit for AY 2020-21 or the conveyance allowance exemption limit for FY 2020 21 wi ll not be any different from other taxpayers. This has been in force since the Budget- 2015 announced in April 2015. 

But as mentioned above, in relation to disabled employees there is relief under the new tax regime which are:

• The ad-hoc exemption limits of Rs 3200/month towards transport allowance for physically challenged or orthopedically disabled may be made while calculating the income from salary. 
• The latest notification places the responsibility of providing free employee transport to disabled or challenged employees on the employer. Thus the travel allowance given to such challenged and disabled employees, towards their commute from and to the workplace, is exempt under the new tax regime scheme too.

Also Read: How to Claim Relief Under Section 89(1) On Salary Arrears

Central Government employees conveyance allowances

Here’s a table for Central Government Employees which explains the conveyance  allowance section and the limits imposed in the conveyance exemption u/s 10(14 ).

Consolidated Travelling Allowance

A government servant whose job involves a lot of work-related travel can be permanently given a monthly allowance as a part of their salary. This needs to be approved by a relevant authority.

This kind of travel allowance is usually given all year round. It does not depend on the fact whether the government servant is posted at the headquarters or not. This amount replaces any other money paid for travel done by the official or government servant within the scope of his/her work.

However, there are also some situations when this allowance cannot be given. The government employee cannot claim this allowance when he/she is on temporary transfer, leave or at the time of joining. 

Conclusion

In the above article, we have studied how and why conveyance or travel allowance is paid by the company to the employee over and above the Basic Pay. This is to cover your travel expenses made while going to the office or other work-related places. We also know now that UPSC members U/S 10 (45) and physically challenged persons are treated as special cases under the Income Tax Act of 1961. Travel allowance was last revised in the 2015 Budget, from Rs 800/ month to Rs 1600/ month. This came into effect in April 2015. 

When filing the ITR the employees need not produce any receipts/ vouchers to claim this exemption limit. However, if you wish to ease the process of salary calculations and tax planning it makes sense to use the reputed KhataBook app. It helps calculate all salary components like HRA, DA, Conveyance Allowance etc., and plan your tax burden better.