Transport Allowance for Salaried Employees: Meaning, Conditions & Exemption

What is the Transport Allowance?

Transport allowance is the money that you receive from your employer for commuting from your residence to the office and vice versa. However, transport allowance under section 10(14) of the Income Tax Act is read with rule 2BB of the Income Tax Rules. Based on section 2BB, it can be any of the following -

• Allowance granted to an employee to meet his expenditure of travelling from his place of residence to the place of duty.
• Transport allowance is taxable in the hands of employees as it is added to their gross salaries. Employees who are blind, deaf, dumb, or orthopaedically handicapped are allowed upto Rs.3200 per month.

Who can get Transport Allowance?

Not everyone receives the transport allowance. Only those employees whose employer specifically provides it in their CTC structure get it. Thus, the relationship of employer and employee must exist as a precondition for receiving the transport allowance. This means all salaried persons are eligible to receive transport allowance, and self-employed persons cannot claim it.

Is Transport Allowance taxable? If yes, what is the tax exemption on Transport Allowance?

The whole amount of transport allowance received is not taxable. The government knows it is a genuine expense and thus wants to save you from the burden of paying heavy taxes. For this purpose, the amount received as transport allowance is made partially taxable, i.e., partially exempt under section 10(14)(ii) of the Income Tax Act.

This means that the whole amount of transport allowance received is not tax-free. There are limits on tax exemption depending on your tax situation.

What is the Amount of Exemption on Transport Allowance?

As per section 10(14) of the Income Tax Act, the following exemptions and deductions are allowed on transport allowance -

Note:

• Starting FY 2018-2019, the medical and transport allowances exemptions were merged. A standard deduction was introduced in its place. The standard deduction can be claimed by the employees without producing any bills or documents
• Employers will consider the standard deduction to compute the net taxable salary while calculating the TDS.
• Transport allowance is only available for physically challenged employees and employees of a transport business.

How is Tax Exemption on Transport Allowance Calculated?

The calculation of the tax exemption is very simple. All you have to do is just subtract the amount of tax exemption (depending on the limit applicable) from the amount received.

For instance
If you receive Rs. 4000 per month from your company as transport Allowance, then your tax situation would be -

Use our free Transport Allowance tax exemption utility, specifically designed for the calculation of the tax-free amount on Transport Allowance.

Is there a Difference between Transport Allowance and Conveyance Allowance?

Many people are confused between the terms transport allowance and conveyance allowance, and make mistakes while claiming tax exemption in their Income Tax Return.

Transport Allowance is covered by section 10(14)(ii) of the Income Tax Act. It is tax-exempt to the extent of the amount notified by the Income Tax Department. Actual expenditure is not required in order to claim the tax exemption.

Conveyance Allowance is covered by section 10 (14)(i) of the Income Tax Act. It is tax-exempt to the extent of the amount actually spent for the official purpose for which it is given, in order to claim the tax exemption. Tax benefit can be taken only when no free conveyance is provided for the same purpose.

“Did you know that it is not mandatory to spend the complete amount of Transport Allowance received in order to get the benefit of tax exemption!”

Transport Allowance Under the New Tax Regime

Individuals who opt for the new regime cannot claim exemptions such as HRA or deductions for tax-saving investments.

However, the new tax regime does allow certain tax-exempt allowances. Here are some of the allowances available under the new tax regime:

• Travel Allowance for Tour or Transfer: Employers can provide an allowance to cover travel expenses related to tours or job transfers. This includes airfare, train fare, and other transportation costs.
• Daily Allowance During Travel: Employers may also give an allowance to cover daily expenses such as meals and other charges when employees are away from their usual place of work for a tour or transfer.
• Conveyance Allowance for Official Duties: Employees can claim an allowance for conveyance expenses incurred while performing official duties, provided the employer does not offer free transport.
• Transport Allowance for Disabled Employees: Employees who are blind, deaf and mute, or orthopedically disabled in the lower limbs can claim a transport allowance of up to ₹3,200 per month for commuting between home and work. For others, this allowance is fully taxable.

Here is an example of the calculation considering transport allowance exemption in the case of specially abled employees -

How to Claim Transport Allowance while Filing Income Tax Return?

Generally, your employer takes care that you receive the benefit of tax exemption on transport allowance at the time of deducting your TDS from your paycheck. Then, all you have to do is just enter the amount mentioned in your Form 16 part B in the Income from Salary column of your ITR Form.

But in case you want to check whether your employer has given you full tax benefit on transport allowance, or he completely forgot to give the tax benefit in your Form 16, then here is what you should do -

• Firstly, check your CTC structure from your salary slip.
• See how much amount of Transport Allowance is part of your CTC.
• If the amount of allowance in the CTC structure is less than Rs. 3200 per month, then the whole amount would be tax-free.
• If the amount in the CTC structure is more than Rs. 3200 per month, then tax-free amount would be to the extent of Rs. 3200 per month only.

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