Conveyance Allowance

What is Conveyance Allowance?

Conveyance Allowance is offered to employees to support their travel expenses to and from the workplace.

• Fixed amount: Usually a standard monthly allowance.

• Eligible employees: Both government and private sector employees.

• Exempted: Self-employed professionals cannot claim the conveyance allowance benefit for tax exemption.

Taxation Rules for Conveyance Allowance

Conveyance Allowance taxation is applicable differently for the old and new tax regimes. An Income Tax Calculator can help you understand the tax impact of Conveyance Allowance on both these tax regimes:

Note: If the new tax regime is chosen, allowances like conveyance are added to income without exemptions.

Conveyance Allowance for Specific Scenarios

Eligibility Criteria

• Employee must be traveling between the office and residence.

• Not applicable if the employer provides free transportation.

• Medical employees and disabled employees may get higher exemptions (up to ₹3,200/month).

Documentation to Claim Conveyance Allowance Exemptions

Employees may need to submit Form 10D and maintain fuel or toll receipts as proof during tax filings​ to get income tax exemption benefits.

Examples of Conveyance Allowance:

Example 1:

Rahul works as an IT professional and receives ₹2,000/month as conveyance allowance.

• Old Tax Regime: Rahul can claim an exemption of ₹1,600/month, and the rest ₹400/month is taxable.

• New Tax Regime: Rahul cannot claim any exemption, and the entire ₹2,000/month is taxable.

Example 2:

Priya, a physically disabled employee, receives ₹3,000/month for transportation.

• Old Tax Regime: Full exemption of ₹3,200/month.

• New Tax Regime: ₹3,000 is fully taxable.

How to Claim Conveyance Allowance?

Under the old tax regime, employees need to:

• Include the conveyance amount in their salary slip.

• Submit relevant travel details (if asked by the employer).

• Declare the exemption in Form 16 and income tax returns.

Impact of New Tax Regime on Conveyance Allowance

• With the new regime promoting lower tax rates but no deductions, employees need to decide if they prefer:

  • Higher take-home salary under the new regime (without allowances).

  • Tax-saving exemptions under the old regime.

Travel Allowances for Central Government Employees

Central government employees receive travel allowances based on the distance travelled for official duties. Below is a summary of the allowances:

These allowances help cover costs when employees travel as part of their official duties​.

Recent Developments in Conveyance Allowance Regulations

• No Separate Exemption for Conveyance Post-Standard Deduction: With the reintroduction of the ₹50,000 standard deduction on salaries under the old tax regime, conveyance allowance is now usually incorporated within special allowances.

• Transportation Facilities Impact on Allowance: Employees who receive company-provided transportation are not eligible for a conveyance allowance​.

• Integration with Payroll Systems: Many companies now automate payroll management, including conveyance allowance, to ensure compliance with tax rules​.

Conclusion

Conveyance allowance provides financial support for employees’ commuting needs. Under the old tax regime, exemptions can reduce tax liability. However, the new regime simplifies the process but eliminates exemptions. Employees should evaluate their travel expenses and income levels to decide which tax regime is more beneficial.