Transport allowance is included as a salary component in employees’ salaries to meet the expenses of traveling home to the workplace. Costs spent by employees while commuting from living place to workplace and vice versa are exempted from taxable income within the allowable expense limit.
Earlier conveyance allowance received as salary component is exempted up to Rs. 1600 per month (Rs. 19200 per year) and any excess conveyance allowance received is taxable if it crosses the exemption limit. as per section 10 sub-section 14(ii) and Rule 2BB of I of the IT Act.
In Budget 2018, the government of India introduced a standard deduction of Rs. 40,000 which replaced the conveyance allowance of Rs. 19200 and medical allowance of Rs. 15,000 per annum.
Since Budget 2019 the standard deduction amount has been increased from Rs. 40,000 to Rs. 50,000.
Transport Allowance paid to an employee for the travel expense for commuting between residence and workplace. As per Section 10 (14) of the Income-tax Act, 1961. Rs. 3,200 is exempted per month for an employee if he is blind, deaf, dumb or orthopedically handicapped with a disability of lower extremities
Transport Allowance is paid to the employees by the employer who runs a transport business to meet their personal expenditure during the running of such transport from place to place. The below exemption is applicable to the employee if he is not availing of the daily allowance. Amount of exemption shall be the least of the following:
- a) 70% of such allowance; or
- b) Rs. 10,000 per month.
