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Conveyance & Transport Allowance : Differences and Exemptions

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Hiral Vakil

Conveyance Allowance
Salary Components
Salary Income
Transport Allowance

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.

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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)

From FY 2018-19 onward Transport Allowance has been discontinued. Instead, Standard Deduction up to INR 40,000 has been introduced for all salaried employees. Standard Deduction up to INR 50,000 is allowed from FY 2019-20 onwards.
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From FY 2018-19 onward Transport Allowance has been discontinued. Instead, Standard Deduction up to INR 40,000 has been introduced for all salaried employees. Standard Deduction up to INR 50,000 is allowed from FY 2019-20 onwards.

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.

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FAQs

What is the difference between Conveyance and Transport Allowance?

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.

How much conveyance allowance can I claim?

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.

Got Questions? Ask Away!

  1. Hey @sushil_verma

    There are a wide range of deductions that you can claim. Apart from Section 80C tax deductions, you could claim deductions up to INR 25,000 (INR 50,000 for Senior Citizens) buying Mediclaim u/s 80D. You can claim a deduction of INR 50,000 on home loan interest under Section 80EE.

  2. Hey @Dia_malhotra , there are many deductions that you can avail of. Your salary package may include different allowances like House Rent Allowance (HRA), conveyance, transport allowance, medical reimbursement, etc. Additionally, some of these allowances are exempt up to a certain limit under section 10 of the Income Tax Act.

    For eg,

    • Medical allowance is exempt up to INR 15,000 on a reimbursement basis.
    • Children education allowance is exempt up to Rs. 200 per child per month up to a maximum of two children.
    • Conveyance allowance is exempt up to a maximum of Rs. 1600 per month.

    Tax on employment and entertainment allowance will also be allowed as a deduction from the salary income. Employment tax is deducted from your salary by your employer and then it is deposited to the state government.

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