Transport allowance is granted to the employees to meet their expenditure made on commuting between their residence and place of duty and to the employees working in the transport business.
Calculating the tax on an exemption allowance is a straightforward process. Let's break it down with an example for a clearer understanding.
Example: If your company or employer provides you with a transportation allowance of Rs. 2,100 per month, the taxable amount will be Rs. 500. Here's how it works:
If the received amount had been Rs. 1,600 or less, the entire allowance would have been tax-free.
To get a precise calculation of the tax exemption amount for transport allowance, you can use our Transport Allowance Tax calculator, which is designed to provide accurate results.
Transport allowance is the money provided for the purpose of transport. Transport allowance under Section 10(14) with rule 2BB of the Income-tax Act,1961 is provided for either of the following:-
The amount of the transport allowance is usually determined by the employer, based on factors such as the distance between the employee's home and workplace, the cost of transportation, and the overall compensation package provided to the employee.
You can calculate the Transport Allowance by this formula. A + [(A x D)/100] = Transport Allowance.
Following the government's decision based on the recommendations of the Seventh Central Pay Commission, the President has approved new rates for Transport Allowance for railway employees. These new rates are as follows:
| Employees drawing pay in Pay Level | Rates of Transport Allowance per month | |
|---|---|---|
| Employees posted in the cities as per Annexure | Employees posted at all Other Places | |
| 9 and above | Rs. 7200 + DA thereon | Rs. 3600+ DA thereon |
| 3 to 8 | Rs. 3600 + DA thereon | Rs. 1800 + DA thereon |
| 1 to 2 | Rs. 1350 + DA thereon | Rs. 900 + DA thereon |
Yes, the transport allowance can be given in kind, such as providing the employee with a company vehicle or paying for their public transportation expenses directly.
Only those employees whose employer specifically provides the transport allowance in their CTC structure are eligible to receive it. Thus, the relationship between employer and employee must exist as a precondition for receiving the transport allowance. This means all salaried persons are eligible for 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. There are limits on tax exemption depending on your tax situation. These are :
| Persons | Monthly Tax Exemption(Rs./month) | Yearly Tax Exemption(Rs./year.) |
|---|---|---|
| Handicapped Persons(Salaried) | 3,200 | 38,400 |
| Employees of the Transport System | 70% of the amount received or 10,000, whichever is less | 70% of the amount received or 1,20,000, whichever is less |
Many people need clarification on terms of transport allowance and conveyance allowance and need to correct mistakes while claiming tax exemption in their Income Tax Returns.
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 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 spent for the official purpose for which it is given to claim the tax exemption. Tax benefits can be taken only when no free conveyance is provided for the same purpose.