Taxation

Conveyance Allowance Exemption for FY 2022-23 & 23-24

calendar29 Sep, 2023
timeReading Time: 7 Minutes
Conveyance Allowance Exemption for FY 2022-23 & 23-24

Organisations commonly offer additional benefits to their employees as a gesture of recognition for their outstanding achievements. They are allocated a portion of their compensation to compensate for the costs associated with carrying out their official responsibilities. In addition, these benefits offer tax advantages that employees can avail of while completing their tax filings.

Conveyance allowance, alternatively referred to as transport allowance, is a form of remuneration provided by companies to their employees in order to reimburse them for the costs associated with commuting between their place of residence and their employment. The provision of this supplementary remuneration is typically extended alongside the primary salary, and its taxability is contingent upon the amount supplied by the employer, as per the provisions of the Income Tax Act of India.

Amendments to Conveyance Allowance Rules

New adjustments have been implemented in the conveyance allowance starting from the financial year 2021-22. An additional clause has been appended to Section 2BB of the Income Tax Regulation, thereby permitting the provision of allowances for the subsequent items:

The provision of an allowance to cover travel expenditures during a business trip or relocation.

The provision of a stipend to cover the daily expenditures of an employee while they are away from their usual workplace.

The conveyance allowance can broadly be classified into the following:

Conveyance allowance for commuting between the workplace and residence for salaried individualsINR 19,200 per year or Rs. 1,600 per month
Conveyance charges for commuting between the workplace and residence for physically disabled or handicapped employees.INR 38,400 per year or Rs. 3,200 per month
Conveyance charges for the employees who are in the transport business for personal expenditure, during running option transportLower of 70% of the allowance, or Rs. 10,000 per month.

Explanation under Section

Typically, corporations extend such allowances as a means of compensating for the absence of transport services rendered to their staff members. In the event that an employer provides such amenities, the provision of a conveyance allowance will be withheld, irrespective of an employee’s utilisation or decision to decline the company’s transport service.

Conveyance Allowance Exemption Limit for AY 2023-24

As per the provisions outlined in Section 10(14)(ii) of the Income Tax Act and Rule 2BB of the Income Tax Rules, people who get a salary are eligible to avail an exemption for conveyance allowance. This exemption allows for a maximum amount of INR 1,600 per month or INR 19,200 per annum within a given financial year.

Currently, companies are not subject to any restrictions regarding the maximum amount of conveyance allowance they can offer to their employees. Furthermore, the quantity of permission will differ across different companies. However, the level of exemption will stay consistent across all instances.

However, there are certain exemptions:

  • The tax exemption limit for conveyance allowance for those with vision impairments or orthopaedic disabilities is INR 3,200 per month. 
  • In accordance with Section 10(45) of the Income Tax Act, members of the Union Public Service Commission (UPSC) are exempt from paying taxes on their conveyance allowance.
  • As per the regulations set forth by the Central Board of Direct Taxes (CBDT), employees are not required to provide any documentation when completing their income tax returns in relation to this matter.

How to Calculate Conveyance Allowance in Salary?

There is no prescribed methodology for determining the extent of the deduction for conveyance allowance that an individual might claim during a given fiscal year. For individuals who get a fixed salary, the highest amount of relief that may be obtained is INR 1,600 per month or INR 19,200 per year. This relief can be subtracted when determining the amount of taxable income.

If an individual receives additional special allowances, they have the option to combine these allowances with their conveyance benefit in order to qualify for tax deductions.

As an illustration, if an individual receives a monthly special allowance of INR 6,000, they have the option to include an additional INR 1,600 per month as a conveyance allowance, so enabling them to claim the entire amount as an exemption alongside other special allowances. Nevertheless, it is highly recommended that individuals get guidance from a tax expert prior to proceeding with such action.  

Conveyance Allowance Exemption Deduction for AY 2023- 24

In addition to the conveyance allowance, which grants tax exemption on one’s taxable income, there exist alternative avenues for mitigating one’s tax liability. The aforementioned items encompass:

Life insurance plans offer valuable tax benefits. Under Section 80C, individuals are eligible to deduct up to INR 1.5 lakh of the premiums paid from their taxable income. The policy’s death benefit is fully exempt from taxation. According to Section 10, individuals are eligible to claim a tax deduction if the amount of their premium falls within 10 per cent  of the total assured.

Health insurance policies might be eligible for tax deductions. According to Section 80D of the Internal Revenue Code, individuals are eligible to claim tax deductions on health insurance premiums without incurring any tax liability. For regular taxpayers, the highest deduction allowable is INR 25,000, but senior people are eligible for a higher maximum deduction of INR 50,000. It is possible to obtain a greater deduction of funds by acquiring health insurance coverage for one’s parents. The maximum deduction would also be INR 25,000 or INR 50,000, contingent upon the ages of one’s parents.

Contributions made towards the Public Provident Fund (PPF) scheme, National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY), Senior Citizen Savings Scheme (SCSS), 5-year fixed deposits, and similar financial instruments are eligible for tax deduction under Section 80C of the Income Tax Act. The maximum allowable deduction limit for such contributions is INR 1.5 lakhs.

ELSS mutual fund schemes provide tax benefits for investments made under the provisions of Section 80C.

As stipulated in Section 80C, the repayment of the loan principal is eligible for deduction as a business expense. Both Section 24(b) and Section 80EEA provide provisions for the tax-exempt treatment of paid interest. Nevertheless, the eligibility for claiming deduction under Section 80EEA is contingent upon certain criteria..

Central Government Employees’ Conveyance Allowance Exemption

The latest amendments to the income tax regulations, as stated by the Central Board of Direct Tax, have enabled salaried workers to avail an exemption by choosing to file for lower personal income tax brackets. This exemption pertains specifically to transport advantages offered by employers.

The implementation of this newly introduced tax system will be applicable to the income received commencing from the fiscal year. The inclusion of the supplementary clause adheres to the established protocol for implementing these exemptions under the 2BB rule. The term “it” refers to various types of allowances provided to employees. These allowances include those intended to cover travel expenses for transfers or tours, those intended to cover daily expenses incurred by an employee while away from their usual place of employment, and those intended to cover transportation costs incurred while performing duties in cases where the employer does not provide free transportation to the employee. The declaration additionally grants an exemption to individuals with physical disabilities, relieving them from the obligation to cover transport costs, with a cap set at a maximum of 3200 INR each month.

What is the Conveyance Allowance for Handicapped People?

Prior to April 2015, handicapped individuals were granted a greater exemption limit for conveyance allowance, amounting to ₹ 1,600 per month or ₹ 19,200 per year, in contrast to regular taxpayers. Nevertheless, the introduction of Budget 2015 resulted in the establishment of a standardised exemption limit of ₹ 1,600 per month for all classifications of taxpayers.

Is there any difference between transport allowance and conveyance allowance?

There is a lack of differentiation between the two classifications of allowances. Nevertheless, it is worth noting that larger corporations have the capacity to remunerate certain employees for additional work-related travel obligations, such as attending meetings or conferences. Furthermore, these corporations also ensure that all employees are duly reimbursed for their travel expenses incurred when commuting to and from the workplace. In such cases, employers seek to differentiate between these two classifications of allowances. The transport allowance is the financial provision allocated to offset the expenses associated with commuting between the office and the place of residence in such circumstances. The term “conveyance” refers to the act of transferring or transporting something from one the concept of an allowance refers to a regular monetary sum provided to an individual, typically an Exemption then transforms into remuneration provided to fellow employees in order to offset their commuting expenses incurred for work-related purposes.

Conclusion

Employers provide employees with a conveyance allowance solely in cases where the company does not offer any transportation facilities. The allocation in question is determined as a component of the employee’s fundamental salary and is subject to a specified threshold, above

FAQs

What is conveyance allowance?

Conveyance Allowance refers to a monetary benefit provided by an organisation to its employees in order to offset the expenses associated with commuting to and from their workplace. In a general sense, the income tax exemption is applicable up to a fixed limit established by the tax authorities. The determination of the conveyance allowance is frequently based on either the employee’s documented transportation expenses or a predefined sum stipulated by the firm

What is the conveyance allowance exemption for FY 23 24?

As per the provisions outlined in Section 10(14)(ii) of the Income Tax Act and Rule 2BB of the Income Tax Rules, people who get a salary are eligible to avail an exemption for conveyance allowance. This exemption allows for a maximum amount of INR 1,600 per month or INR 19,200 per annum within a given financial year

How much exemption can I claim on conveyance allowance?

It is possible to make a claim for exemption from the conveyance allowance under the provisions of Section 10(14(ii)) of the Income Tax Act. The most that may be claimed in a single year is 19,200 rupees, which breaks down to 1,600 rupees per month.

Is it possible to claim both standard deduction and conveyance allowance?

You cannot take use of both the standard deduction and the conveyance allowance at the same time.

Does conveyance allowance come under basic salary?

No, the allowance for travel expenses is not included in the basic income.

Is conveyance allowance included under PF?

No, the conveyance allowance is not encompassed under the purview of the Provident Fund (PF) scheme.

Are there any special cases where exemption limits can be higher?

Individuals who experience visual impairment or orthopaedic disabilities are eligible to avail an exemption of Rs.3,200 per month, which is double the amount of the standard exemption of Rs.1,600 per month.

What is the conveyance allowance provided to central government employees who travel by their own vehicle?

Central government employees are provided with monetary compensation based on the distance they travel using their personal motor vehicles. An amount of Rs.1,680 is offered for distances ranging from 201 to 300 km, Rs.2,520 for distances between 301 and 450 km, Rs.2,980 for distances between 451 and 600 km, Rs.3,646 for distances between 601 and 800 km, and Rs.4,500 for distances exceeding 800 km.

What is the conveyance allowance provided to central government employees who travel through public transport?

Central government employees will receive financial compensation based on the distance they travel using alternative modes of transportation. Specifically, if the distance travelled falls within the range of 201 to 300 km, employees will be offered INR 556. For distances between 301 and 450 km, the compensation will amount to INR 720. Similarly, if the distance travelled ranges from 451 to 600 km, the compensation will be INR 960.

Read Our Article: Section 40A(2) Of Income Tax Act – A Complete Analysis

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