The basic salary is the main component of an employee’s salary structure. Apart from that, employers provide many allowances such as HRA, LTA, transport allowance, conveyance allowance etc. Here is a guide which explains the difference between conveyance allowance and transport allowance and the corresponding rules to claim exemption.
What is the meaning of Conveyance Allowance and Transport Allowance?
A transport allowance u/s 10(14) of the income tax act is paid to employees to meet the cost of the daily commute from home to work and vice versa or for personal expenditure in case of employees in the Transport business provided they are not in receipt of the daily allowance. A conveyance allowance u/s 10(45) of the income tax act 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 the employer provides no transportation service.
Limit for Transport Allowance Exemption
Section 10(14) with Rule 2BB provides conditions for transport allowance exemption. The following table explains the amount of exemption:
| Particulars | Exemption limit |
| Transport allowance for commuting from place of residence to place of duty (with effect from FY 2018-19 no such separate transport allowance is allowed) |
INR 1,600 per month or INR 19,200 per annum |
| Transport allowance for commuting from place of residence to place of duty for an employee who is physically challenged such as blind/deaf/dumb or orthopedically handicapped with disability of lower extremities | INR 3,200 per month or INR 38,400 per annum |
| Transport allowance for employees of transport business for meeting personal expenditure during the running of such transport | The exemption amount shall be lower of following: a) 70% of such allowance; or b) INR 10,000 per month |
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.
Update in the Finance Act, 2019
Finance Act, 2018 introduced a standard deduction of INR 40,000 which was revised to INR 50,000 in Finance Act, 2019 in lieu of a transport allowance of INR 1600 per month and a medical allowance of INR 15,000. This change shall take effect from the financial year 2019-20 and accordingly, no separate transport allowance of INR 1,600 per month is available to employees other than physically challenged employees and employees of a transport business.
Let’s understand with an example:
| Particulars | Upto F.Y 2017-18 (Amount in INR) | For F.Y 2018-19 (Amount in INR) | From F.Y 2019-20 onwards (Amount in INR) |
| Basic Salary | 5,20,000 | 5,20,000 | 5,20,000 |
| Transport allowance (Received as a part of Salary) | 20,000 | 20,000 | 20,000 |
| Transport allowance exemption | (19,200) | NA | NA |
| Net Salary | 5,20,800 | 5,40,000 | 5,40,000 |
| Standard Deduction | NA | (40,000) | (50,000) |
| Net Taxable Salary | 5,20,800 | 5,00,000 | 4,90,000 |
Limit for Conveyance Allowance Exemption
There is no limit on the amount of conveyance a company can provide to its employee. As per the income tax act, the conveyance allowance 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.
Exemption criteria under the New Tax Regime
Starting from FY 2020-21, the government provides taxpayers with the option to choose from the new tax regime for individual and HUF taxpayers. Under the new tax regime, there are flat tax rates and no deductions or exemptions. Also, the individual cannot claim deductions for any tax-saving investments. However, the new tax regime allows an individual to claim the following tax-exempt allowances:
- Allowance by the employer to meet the cost of travel on tour or transfer. It includes an allowance for the cost of travel such as airfare, rail fare, and other transportation costs.
- Any allowance by the employer to meet the ordinary daily charges incurred by an employee on account of absence from the usual place of duty. The allowance should be in respect of the tour or for the period of the journey in connection with a transfer. The allowance includes expenses an employee incurs for food and other daily costs while travelling.
- Allowance to meet conveyance expense incurred while performing duties of an office or employment of profit. However, in this case, the employer should not provide a free conveyance to the employee. The allowance includes travelling expenses an employee incurs while performing official duties.
FAQs
A conveyance allowance is provided to meet transportation expenses in the course of official work. Whereas transport allowance can be claimed for expenses related to commuting 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 was being claimed as an exemption up to FY 2017-18. From FY 2018-19 it was replaced by a standard deduction.
Yes, you can claim actual expenses reimbursed for relocation as exempt by providing proof or invoices for such expenses.
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.
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,
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.
The benefit Section 80EEB can be claimed by individuals only. An individual taxpayer can claim interest on loan of an electric vehicle of up to INR 1.5 lacs u/s 80EEB. However, if the electric vehicle is used for the purpose of business, the vehicle should be reported as an asset, loan should be reported as a liability and the interest on loan can be claimed as a business expense irrespective of the amount. (We have updated the article with the changes).
Thus, if you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR since you would be reporting both personal and business income in the ITR (under your PAN).
As per the Income Tax Act, the deduction under Section 80EEB is applicable from 1st April 2020 i.e. FY 2020-21.
Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback.
No issues. You’re welcome!
Hey @shindeonkar95
In case of capital gain income (LTCG/STCG), transfer expenses are allowed as deduction, except STT.
However, in case of business income (F&O, intraday), all expenses incurred for the business (including STT) are eligible to claim deduction in ITR.
Hope, it helps!
Hello,
Is it possible to claim deductions under S. 80CCF for Infra bonds bought in the secondary market and held to maturity?
There were a number of 10 year infra bonds issued in the 2010- 2013 period, which will start maturing soon. These are all listed on the exchanges (although hardly any liquidity or transactions in them). If I were to buy some of these bonds in the open markets and hold them in my demat to maturity (<3 years), is it possible to claim tax deductions (upto 20k per year) under 80CCF for buying?
I couldn’t find anything on this. Any help is appreciated.
Hello @Veejayy,
Yes you can claim deduction under 80CCF for investment made in specified infrastructure and other tax saving bonds bought in the secondary market and held to maturity.
Deduction under Section 80CCF can be availed only through investment in certain tax saving bonds, issued by banks or corporations after gaining permission from the government which shall be restricted upto 10,000 per year.
These bonds are generally long term bonds, having tenure of more than 5 years with a lock in period of 5 years in most of the cases. These bonds can be sold after the lock in period!
Also, interest earned on these bonds will be taxable.
Hope this helps!
Hi, I need to file my income tax for FY21, I am using Quicko platform for filing, I wanted to confirm if the ELSS investment amount for the FY21 is to be added in the section 80C, since I already the amount of Rs30,072 , should I add my ELSS amount to this existing amount and submit the total
Hey @Sheirsh_Saxena, yes, the investment amount needs to be added under 80C.