Transport Allowance overall could mean stipend provided for transport whenever an employee travels from his/her home to the office.
What is Travel Allowance?
In any case, Transport Allowance fall under Section 10(14) of Income-Tax Act,1961 read with rule 2BB of Income-Tax rules can be one of the accompanyings:
- This Allowance allowed a worker to meet his consumption to drive between his place of home and office/place of duty.
- Allowance granted to a worker working in transport business to meet his consumption during his duty performed in the course of running of such transport starting from one place to the next place provided the employee is not in receipt of the daily allowance.
Discount amount of Exemption
Yes, Section 10 (14) read with Rule 2BB provides for exemption in transport allowance. The discount is as follows:
|Transport allowance for commuting from place of residence to place of duty||Rs 1,600 per month or Rs 19,200 per annum|
|Transport allowance for commuting from place of residence to place of duty for an employee who is physically challenged such as blind/deaf/dumb or orthopedically handicapped with disability of lower extremities||Rs 3,200 per month or Rs 38,400 per annum|
|Transport allowance for employee of transport business for meeting personal expenditure during the running of such transport||Exemption amount shall be lower of following: a) 70% of such allowance; or b) Rs. 10,000 per month|
What are the conditions to guarantee the exemption of transport allowance?
- To guarantee the exemption of allowance conceded to a worker of non-transport business for driving from home to office, the employee needs no proof of expenditure should be submitted and further as far as exemption limit is fixed and accessible regardless of actual expenditure.
- However, the lone condition that should be satisfied is that the employee should not have effectively been given office transport/movement by the employer for such reason.
- Further, in the event of employees of the transport business, no daily allowance has been given by their employer to claim the exemption.
Also, read | Income Tax Exemption on Relocation Allowance
The Contrast between Transport Allowance and Conveyance Allowance?
- While transport allowance is an allowance given to meet driving costs between home and office or to meet individual use of worker of transport business.
- Conveyance Allowance is an allowance allowed to meet the consumption on transport in the performance of official duty.
- Further, while a fixed amount of transport allowance is exempted whether of actual expenditure occurred.
- Conveyance Allowance only to exempt from tax only to the extent of actual expenditure.
Changes by Finance Act, 2018
- Finance Act, 2018 presented a standard deduction of Rs 40,000 instead of a transport allowance of Rs 1600 every month and a Medical Allowance of Rs 15,000.
- This change will produce results from the financial year 2018-19 and accordingly, no separate transport allowance of Rs 1,600 every month is accessible to an employee other than physically challenged employees and employees of a transport business.
- The limit of Rs. 40,000 has been expanded to Rs. 50,000 in the Interim Budget 2019.
Transport Allowance under the new tax regime system (FY 2020-21 onwards)
- From FY 2020-21, the Government gives an optional new tax regime for individuals and HUF taxpayers.
- In the new tax regime, there are flat tax rates and no deduction or exclusions.
- For instance, an individual choosing the new tax regime can’t claim exemptions for HRA, Standard Deduction, and others.
What did the new Tax Regime Permit to claim Tax Exemptions?
Likewise, the individual can’t claim deductions for any tax-saving ventures. In any case, the new tax regime permits a person to claim the accompanying tax-exempt allowances-
- Allowances by the employer to meet the expense of travel on tour or transfer from one place to another.
- It incorporates allowance towards the expense of travel like airfare, rail fare, and other transportation costs.
- Any allowance by the employer to meet the customary day-by-day charges incurred by an employee on account of absence from the usual place of duty.
- The allowance should be in respect of tour or for the period of journey in connection with a transfer.
- The allowance incorporates costs a worker brings about for food and other everyday costs while traveling.
- Allowance to meet transport costs incurred while performing duties of an office or employment of profit.
- In any case, for this situation, the employer should not give a free conveyance to the employee.
- The allowance incorporates the traveling costs an employee incurs while performing official duties.
- On account of a representative who is blind, or deaf and dumb, or orthopedically handicapped, with a disability of lower extremities can claim transport allowance, to meet expenditure on driving from home and the place of duty.
- The advantage is up to Rs 3,200 every month.