Transport Allowance for Salaried Employees

Transport Allowance is a type of reimbursement provided to salaried employees by their employers for the expenses incurred on commuting to work. This allowance is tax-free up to a certain limit as per the provisions of the Income Tax Act in India. The current tax-free limit for transport allowance is Rs. 19,200 per annum. This means that any amount received as transport allowance by an employee that is less than or equal to Rs. 19,200 per annum will not be taxed.

However, if the employee receives an amount in excess of Rs. 19,200 per annum as transport allowance, the excess amount will be taxed as part of the employee's taxable income. The employee will need to declare this amount in their income tax return and pay taxes as applicable.

It is important for employees to keep records of the expenses incurred on commuting to work, such as bus or train fare, to support their claim for transport allowance. Employers can provide this allowance as a separate component of the salary or as part of the salary package.

Quantum of Exemption

The quantum of exemption for transport allowance refers to the limit up to which the allowance is tax-free. In India, as per the provisions of the Income Tax Act, the current tax-free limit for transport allowance is Rs. 19,200 per annum. This means that any amount received as transport allowance by an employee that is less than or equal to Rs. 19,200 per annum will not be taxed.

It is important to note that the quantum of exemption for transport allowance is subject to change as per the provisions of the Income Tax Act. The limit may be revised upwards or downwards in the future, based on changes in the tax laws or other relevant factors. Hence, employees and employers should keep themselves updated on the current quantum of exemption for transport allowance to ensure that they are aware of the tax implications of this allowance.

Difference between transport allowance and conveyance allowance

Transport Allowance and Conveyance Allowance are two different types of allowances provided to salaried employees for commuting to work. While both allowances are meant to reimburse employees for their commuting expenses, there are some differences between the two.

Transport Allowance: This allowance is provided to employees to cover the cost of commuting between their residence and place of work using public or private transportation. The allowance is tax-free up to a certain limit as per the provisions of the Income Tax Act in India, currently set at Rs. 19,200 per annum.

Conveyance Allowance: This allowance is provided to employees to cover the cost of commuting between different places of work, such as when an employee has to visit multiple locations as part of their job. Unlike transport allowance, there is no tax-free limit for conveyance allowance, and the entire amount received is taxable as part of the employee's taxable income.

In summary, transport allowance is meant to cover the cost of commuting between the employee's residence and place of work, while conveyance allowance is meant to cover the cost of commuting between different places of work. Transport allowance is tax-free up to a certain limit, while conveyance allowance is fully taxable.

Transport allowance under the new tax regime (FY 2020-21 onwards)

In the new tax regime for the financial year 2020-21 onwards, the tax treatment of transport allowance has remained unchanged. As per the provisions of the Income Tax Act in India, transport allowance continues to be tax-free up to a certain limit, currently set at Rs. 19,200 per annum. Any amount received as transport allowance by an employee that is less than or equal to this limit will not be taxed.

It is important to note that the new tax regime introduced for the financial year 2020-21 onwards provides for a choice between the old tax regime and the new tax regime. Under the new tax regime, individuals can opt for lower tax rates, but with some restrictions on exemptions and deductions. In the case of transport allowance, it continues to be tax-free up to the limit of Rs. 19,200 per annum, regardless of the choice made by the individual between the old and new tax regimes.

Employees and employers should keep themselves updated on the provisions of the Income Tax Act, including the tax treatment of transport allowance, to ensure that they are aware of the tax implications of this allowance.

Frequently Asked Questions:

Can an employee claim transport allowance for commuting to work?

An employee who is not considered to be disabled is not eligible to claim transport allowance for traveling between their home and place of work or employment.

What is the standard deduction for the Financial Year 2019-20 and Assessment Year 2020-21?

The standard deduction for the Assessment Year 2020-21 is Rs 50,000.

Is it possible to receive tax-free reimbursement for relocation expenses from an employer?

Yes, by providing the necessary proof and invoices to the employer, an employee can receive tax-free reimbursement for relocation expenses.

Are employees eligible for tax-free medical reimbursement from their employer?

The tax exemption for medical reimbursement has been discontinued. Starting from the Financial Year 2018-19, the fixed medical reimbursement and transport allowance have been replaced with a standard deduction.

Can an employee claim conveyance allowance if they don't use the company's transportation services?

No, if the company provides transportation services, the employee is not eligible for conveyance allowance, regardless of whether they use the service or not.

Is there a limit on the maximum amount of conveyance allowance that can be provided?

No, the employer has the discretion to provide whatever amount they deem appropriate for conveyance allowance. However, there is a limit on the tax deduction that can be claimed, which is set at INR 1,600 per month or INR 19,200 per annum.