Everything About Conveyance Allowance

Have you ever heard the term "Conveyance Allowance" but found yourself scratching your head about its meaning? If yes, then fear not, as we're here to explain everything about this allowance. Conveyance allowance is an extra money that employers provide to assist with your daily travels between home and work. It's like a financial aid designed to prevent some of your commuting costs.

It’s not just that! There’s still a lot more to know about it! 

From exploring its key features to understanding the calculation and exemption limits under the Income Tax Act, this article has got you covered. 

Meaning of Conveyance Allowance

Also known as Transport Allowance, Conveyance Allowance is like a little bonus that companies give to their employees for covering the cost of traveling between home and work. This allowance is provided on top of the basic salary component and comes into the picture when the employer doesn't provide a transportation facility. 

NOTE: In case your organisation has its own pick and drop facility, sorry, no Conveyance Allowance for you.

Now, how much you will get as a Conveyance Allowance depends on how far you have to travel and how you get to your workplace. The farther you go, the more you get as Conveyance Allowance. And, whether it gets taxed or not depends on how much Conveyance Allowance your employer is offering

Critical Features of Conveyance Allowance

The critical features of Conveyance Allowance are as follows:

• The monthly exemption threshold limit for conveyance allowance is set at Rs. 1,600 for all salaried individuals

• While the conveyance allowance amount may differ across companies, the uniform tax exemption limit remains Rs. 1,600 per month

• Companies that provide transportation services to their employees typically do not provide conveyance allowance

• Conveyance allowance is eligible for grouping with other allowances, such as special allowance.

Calculation of Conveyance Allowance

Calculating your conveyance allowance exemption doesn't require complex math. The fixed exemption limits are Rs. 1,600 per month or Rs. 19,200 per year, regardless of your tax bracket. However, it's interesting to note that you can mix it up with other allowances, like the Special Allowance. 

Let us help you understand this with an example. 

Suppose your employer gives you a fully taxable Special Allowance of Rs. 4,000 per month,  you can designate Rs. 1,600 from this amount as conveyance allowance and seek tax exemption on it. 

Exemption Limit of Conveyance Allowance from the Income Tax

It's significant to understand the tax implications of conveyance allowance because it provides you an opportunity to keep a portion of it tax-free.  While there exists no restriction on the conveyance allowance offered by employers, a limitation is imposed on the tax exemption under the Income Tax Act of India.

Section 10(14) and Rule 2BB of the Income Tax Rules set a maximum exemption limit of Rs. 1,600 per month or Rs. 19,200 yearly for conveyance allowance. Before April 2015, the conveyance allowance tax exemption limit was set at Rs. 800 per month or Rs. 9,600 per annum. This rise in 2015 was intended to offer tax benefits to middle-class taxpayers. 

To receive this exemption, employees must provide Form 10D with their income tax returns. The employer's approval is required for this document and must include the employee's name, PAN, and the amount of conveyance allowance disbursed throughout the financial year.

Furthermore, it is necessary to save thorough documentation of all transportation-related expenses, such as fuel receipts, tolls, parking fees, etc.

Special Exemptions and Provisions

In specific cases, special exemptions apply under the Income Tax Act:

• Individuals who are blind or handicapped enjoy a special exemption, with a limit for this exemption capped at Rs. 3,200 per month.

• As per Section 10(45) of the Income Tax Act, 1961, UPSC members are exempted from paying taxes on their conveyance allowance.

Conveyance Allowances for Central Government Employees

When it comes to central government employees, the rules for conveyance allowance are pretty different. Government officials receive a special allowance, which replaces various travel allowances when government officials are on official duty within their designated responsibilities.

Government employees also have the option to receive a fixed traveling allowance for the entire year, even without the immediate authorisation of the signing authority. However, it's important to note that during periods of leave or temporary transfer, this allowance cannot be claimed unless outlined in the duly signed rules.

The conveyance allowance for central government employees, as per the specified rules is tabulated below:

Conclusion

So, we've reached the end of our guide on Conveyance Allowance. From what it is to how it's calculated and even some special cases, we have covered a lot, right?  Now that you know everything about Travel Allowance, you're all set to make smart choices about this work benefit. It's not just about saving money; it's also about making the most of what your job has to offer. 

Frequently Asked Questions (FAQs)

Q 1. What exactly is Conveyance Allowance?

Ans. Conveyance Allowance is an additional sum provided by employers to help employees cover the costs of traveling between home and work.

Q 2. Are there specific exemptions for individuals with disability?

Ans. Yes, individuals who are blind or handicapped enjoy a special exemption, capped at Rs. 3,200 per month under the Income Tax Act, 1961. 

Q 3. What documentation is required for tax exemption on Conveyance Allowance?

Ans. To claim tax exemption on Conveyance Allowance, employees need to submit Form 10D along with thorough documentation of transportation-related expenses, such as fuel receipts, parking fees, etc.