Not everyone receives the transport allowance. Employees whose CTC structure has TA as an element are allowed to claim this benefit. Thus, the relationship of employer and employee must exist as a precondition for receiving the transport allowance. Please note: self-employed persons cannot claim this benefit.
Transport allowance is the money that you receive from your employer for commuting from your residence to office and vice-versa.
If you are an employee in Transport System who runs a transport from one place to another as a part of your official duty, then transport allowance means the money you receive to meet your personal expenses incurred during the course of your official duty provided employee is not in receipt of daily allowance.
Not everyone receives the transport allowance. Only those employees whose employer specifically provides it in their CTC structure gets 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 for receiving transport allowance and self-employed persons cannot claim it.
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. These are :
Limits of tax exemption on Transport Allowance :
Transport Allowance of Rs.1,600 per month is tax-free for a salaried employee. Any amount received in excess of Rs.1600 is taxable.
Transport Allowance of Rs.3,200 per month is tax-free for handicapped employees. Handicapped employees mean all the employees who are blind or deaf or dumb or orthopedically handicapped with the disability of lower extremities.
Lower of Rs.10,000 per month or 70 % of transport allowance is tax-free for specified employees of the transport system.This exemption is given to those employees who run transport from one place to another as a part of their official duty and does not receive a daily allowance.
Transport Allowance exemption for A.Y. 2018-19(F.Y. 2017-18) :
|Persons||Monthly Tax Exemption(Rs./month)||Yearly Tax Exemption(Rs./year.)|
|Salaried Persons (Non-Handicapped, Non-Transport Industry)||1,600||19,200|
|Employees of Transport System||70% of amount received or 10,000, whichever is less||70% of amount received or 1,20,000, whichever is less|
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.
If you receive Rs. 2000 per month from your company as transport Allowance then your tax situation would be -
|Amount of Transport Allowance Received||Rs.2000/month|
|Less: Amount of Tax Exemption as per law||Rs.1600/month|
|Taxable Amount of Tax Exemption||Rs.400/month|
Use our free Transport Allowance tax exemption utility specifically designed for calculation of tax-free amount on Transport Allowance.
Many people are confused between terms transport allowance and conveyance allowance and make mistake 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 the 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!”
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 the point 6 of 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-
Expert Tip: “Check your CTC structure today and if the Transport Allowance is not the part of your CTC, request HR to restructure your CTC and save the Tax.”
Finding difficulty in claiming the benefit of transport allowance in your income tax return?
Contact our team of specialized CA’s to get maximum benefit!
Has your take home salary increased? Check the impact of Budget 2023 on your incomeCheck Now→