Conveyance Allowance Exemption
Conveyance allowance or Transport allowance is an allowance granted to an employee to meet his/her expenditure for the purpose of commuting between the place of residence & duty.
Exemption Limit for Conveyance Allowance
Transport allowance exemption is provided in Section 10(14)(ii) of the Income Tax Act and Rule 2BB of Income-tax Rules. Transport allowance is exempt to the extent to Rs 1,600 per month, i.e. upto Rs 19,200 is exempt for a year. Any amount paid over this limit is taxable. For example if an employee is getting Rs 3,000 as Transport or Conveyance allowance every month, Rs 1,600 is exempt and Rs 1,400 is taxable per month. Thus out of Rs 36,000 transport allowance received for the year, Rs 19,200 would be exempt and Rs 16,800 would be taxable.
It is to be noted that the exemption limit for transport allowance was Rs 800 per month till March 2015 (i.e. FY 2014-15 corresponding to AY 2015-16). Increase in the limit from Rs 800 per month to Rs 1,600 per month was announced in Union Budget 2015 and the same is effective April 2015 (i.e. FY 2015-16 corresponding to AY 2016-17).
Also note that previously transport allowance granted to physically disabled employee had higher exemption limit of Rs 1,600 per month compared to Rs 800 per month for others. With this amendment, transport allowance exemption is now uniform at Rs 1,600 per month for all employees.