Conveyance Allowance: All You Need to Know About It

Conveyance allowance, also known as travel allowance, is offered by employers along with the basic salary when they do not provide transport facilities. It falls under the purview of CBDT (Central Board of Direct Taxes). 

CBDT is a statutory body that reports directly to the Revenue Department of the Government of India. It is responsible for revising the rules associated with conveyance allowance periodically.

This blog post covers everything from what conveyance allowance is to tax exemption rules and how to calculate it for your employees. Let’s start from the basics. 

What is conveyance allowance? 

When employers offer their employees allowances to cover their travel expenses from residence to workplace and vice versa, it is known as conveyance allowance. The amount provided could be taxable as per the Income Tax Act of India. It depends if the conveyance allowance is below or above the exemption limit. 

Read the next section to know more about tax exemption on conveyance allowance.

Conveyance allowance exemption from tax

Currently, there is a standard exemption of Rs. 50,000 on the gross salary as per the latest rules by the Income Tax department of India. There is no separate exemption for conveyance allowance. If any company provides conveyance allowance, in that case, ESI calculation is done excluding it.

How to calculate conveyance allowance? 

The conveyance allowance tax exemption limit is Rs. 1,600 per month, irrespective of the employee’s income tax bracket. Employees who receive any special taxable allowance can substitute Rs. 1,600 from it as a conveyance allowance and seek tax exemption. 

Any allowance above this limit is added to a person’s taxable income under the head ‘salaries’ and taxed as per the applicable income tax slab. 

Let us understand with an example. Suppose ABC Company offers its employees a special allowance of Rs. 6000 monthly. This amount is entirely taxable. Now, an employee can consider Rs. 1,600 from Rs. 6000 as his conveyance allowance and seek tax exemption for it. However, it is a good idea to consult a tax expert before claiming tax exemptions for conveyance allowance. 

Important things to note 

Listed below are the essential things to remember:

• The amount provided as conveyance allowance varies from one company to the other. But, the exemption limit remains the same. 
• Salaried persons do not need to provide special documents to receive a conveyance allowance. 
• This allowance can fall under special allowances. 
• If employers provide transportation facilities, then a conveyance allowance won’t be provided. 
• Government employees receive a consolidated travel allowance for work-related transportation facilities. It substitutes every allowance for transit required for the official to carry out his duty effortlessly. 

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