Conveyance & Transport Allowance: Differences and Exemptions
What is Conveyance Allowance
Conveyance allowance is an allowance offered to employees of a company 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 Transport allowance. Conveyance allowance is provided to meet the transportation cost for official purpose 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 income tax act.
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 , exemption is allowed to an employee to the extent of expenditure actually incurred for official purpose.
Because of such exemption condition, companies usually provide conveyance allowance on a reimbursement basis. So if an employee incurs any transportation expenses out of pocket for official purpose, 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 Rs. 1600 per month. So a total of Rs. 19,200 is exempt as transport allowance. For differently abled employees, the exemption limit for transport allowance is Rs. 3200 per month (Rs. 38,400 per annum)
Up until FY 2014-15, the exemption limit on transport allowance was Rs. 800 per month (Rs. 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.
Frequently Asked Questions
1. What is the different 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.
2. How much conveyance allowance can I claim?
Conveyance allowance is completely exempt from tax. However, Transport allowance, up to Rs. 1600 per month or Rs. 19,200 per year can be claimed as an exemption up to FY 2017-18.