Conveyance allowance is an allowance offered to taxpayers who receive income from salary to meet the cost of transportation in the course of official work. Usually, it is provided to employees only if there is no transportation provided by the employer.
Conveyance allowance v/s Transport Allowance
Conveyance allowance is commonly misunderstood as a Transport allowance. It is provided to meet the transportation cost for official purposes whereas transport allowance is offered to an employee to meet the cost of commuting between residence and office. Both these allowances are separately mentioned under the income tax act.
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Tax Exemption on Conveyance Allowance
There is no limit on the amount of conveyance a company can provide to its employer. As per section 10(14) of the income tax act & Rule-2BB, the exemption is allowed to an employee to the extent of expenditure actually incurred for official purposes.
Because of such exemption conditions, companies usually provide this allowance on a reimbursement basis. So if an employee incurs any transportation expenses out of pocket for official purposes, the company will reimburse the same amount to him upon submission of proof of expense.
Tax Exemption on Transport Allowance
As per Section 10(14) of the income tax act and Rule-2BB, Transport allowance is exempt up to INR 1600 per month. So a total of INR 19,200 is exempt as a transport allowance. For differently-abled employees, the exemption limit for transport allowance is INR 3200 per month (INR 38,400 per annum)
Up until FY 2014-15, the exemption limit on transport allowance was Rs. 800 per month (INR 9600 per annum). But the limit was enhanced to Rs. 1600 per annum in Budget 2015. This step was taken to provide a tax benefit to middle-class commuters in the country.
FAQs
Conveyance is provided to meet transportation expenses in the course of official work. Whereas transport allowance can be claimed for expenses related to commute between home and work.
This allowance is completely exempt from tax. However, Transport allowance, up to INR 1600 per month or INR 19,200 per year can be claimed as an exemption up to FY 2017-18.
