Out of all the allowances given to the employees, Conveyance Allowance is, arguably, one that creates the most confusion. People are almost always puzzled about this.
Table of Content
- 1 1. What are Allowances?
- 2 2. What are these partially taxable allowances?
- 3 3. What is the Conveyance Allowance?
- 4 4. How to Calculate Conveyance Allowance?
- 5 5. When is Transport Allowance applicable?
- 6 6. Conveyance Allowance & Tax Exemption-
- 7 7. Latest revisions to Conveyance Allowance
- 8 8. Conveyance for Central Government Employees
Well, there are two reasons for that. First, because conveyance allowance also gets referred to as transport allowance, a lot of companies use either of the names, which leaves employees wondering if the two are the same. And the second reason is that unlike most allowances which fall under the taxable or non-taxable brackets, transport allowance is partially taxable – may or may not be taxed. Now what that means is something we’ll explain to you in just a little while.
But before that let’s take a look at why NOT being familiar with the allowance terminologies is not good for you or your financial health.
1. What are Allowances?
Allowances are fixed by the government; as such, employers are liable to pass on those benefits to the employees. By not paying attention to the benefits you’re entitled to and the full range of it, you might actually be helping your employer get away with unethical tax saving practices. And it just doesn’t stop here.
A lot of times, employers even use corrupt ways to strip the employees of the benefits and keep it for themselves. Hence, by being informed about your allowances, you’re not just helping your own cause, but also preventing your company from any wrongdoings in the money matters.
Now, although a huge majority of allowances fall under the taxable or non-taxable brackets, there are a handful of them which do not fall under either of the two and are categorised into partially taxable allowances.
2. What are these partially taxable allowances?
Allowances that fall under the partially taxable bracket are those that can be exempted from tax, but to a certain limit. This limit is set according to the income tax rules and regulations and can be revised (or kept constant) in every budget session. Apart from the Traveling allowance, some of the other important allowances such as House Rent Allowance (HRA) and Medical allowance also fall under this category.
3. What is the Conveyance Allowance?
Conveyance allowance is one of the many allowances offered by an employer to its employees to compensate for the commuting an employee does, in between his / her residence and place of work. Even your work-related trips, if any, can be grouped under this. Salaried people are not required to showcase any bills or receipts to claim the benefits and it is always paid on top of an employee’s basic salary.
4. How to Calculate Conveyance Allowance?
Now, people often ask “How to calculate my Transport Allowance”?
To give you the answer, it’s well known that travel exemptions up to INR 1600 are allowed but that does not mean that your company has to necessarily pay you Rs. 1600 as a travel allowance. The amount that a company can offer in this regard can vary, but the limit to which exemptions can be claimed is Rs. 1600 only. For example, if your Conveyance allowance is Rs. 2000, you’ll have to pay taxes on the remaining amount only, which in this case is Rs. 400. And this is the exact meaning of a partially taxable allowance.
Sometimes Conveyance can also be grouped under Special allowance, which comes under the fully taxable bracket. In such a scenario, let’s say your Special allowance comes out to be 4000. Now, you can substitute 1600 as your Conveyance allowance and claim exemptions for the same.
5. When is Transport Allowance applicable?
Another thing that you should know about Transport allowance is that it’s only applicable when the company does not have a transportation service in place for its employees. In case a company does offer transportation services for its employees, the conveyance allowance section will not find its place on the salary slip, whether employees avail the service or not.
6. Conveyance Allowance & Tax Exemption-
Conveyance allowance is exempted from tax up to Rs. 1600 per month or Rs. 19,200 annually. Post that any extra amount will be taxable as per the income tax act. What this means is as long as your commuting expenses do not cross Rs. 1600, you don’t have to pay any tax on your Travel allowance. But the moment it goes beyond 1600, you’ll have to pay taxes on the exceeded amount.
Also, the Travel Allowance for physically challenged people such as blind, deaf or dumb or orthopedically handicapped with a disability of lower extremities is Rs. 3,200 per month or 38,400 per annum. And the sections under which this exemption is covered are Section 10(14)(ii) of Income Tax Act and Rule 2BB of Income Tax Rules.
You might be surprised to know that there’re at least 11 other least known Allowances for Income Tax Saving.
7. Latest revisions to Conveyance Allowance
The last revision, the Conveyance allowance saw, was in 2015. And it spurred not one but two major changes.
The first was that prior to April 2015, the tax exemption limit for this allowance was limited to half of the current value – Rs. 800 per month or Rs. 9,600 per annum. Later, the exemption limits were expanded to provide tax benefits to the country’s middle-class taxpayers.
The second was in terms of the benefits for handicapped people. Before April 2015, handicapped people used to receive tax exemptions up to Rs. 1600 per month which was higher than the then tax exemption for others, which was capped at Rs. 800. But in the same budget 2015, the exemption limit was made common for all categories of taxpayers.
8. Conveyance for Central Government Employees
|Average monthly travel on official duty||For journey by own motor car||For journey by other modes of Conveyance|
|201 – 300 km||1,680||556|
|301 – 450 km||2,520||720|
|451 – 600||2,980||960|
|601 – 800||3,646||1,126|
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