Transport Allowance Exemption

Transport Allowance Exemption | Meaning, Is Transport Allowance Taxable?

February 17, 2024 / Income Tax / By

Transport Allowance Exemption: Employer offers transport allowance to its workers for commuting from home to workplace & vice-versa. If the amount crosses the exemption limit, then it is taxable.

Many allowances are offered to their representatives by the Employers. One such allowance is provided for transportation. The allowance provided to the employees for commuting from residence to their workplace and vice versa is termed as transport allowance. From the basic Income salary structure that the employee receives and this allowance is provided in addition. The employer usually offers a transport allowance in circumstances where it does not offer any conveyor facility to its employees.

The Exemption Made Under Transport Allowance

As specified under Section 10 sub-Section 14(ii) of the Income Tax Act and Rule 2BB of Income Tax rule, the exemption provided for a transportation allowance. The transport allowance exemption limit is Rs. 1600 per month (Rs. 19200 per year). Any expense paid above the transport allowance limit is imposed to tax under the head Income from Salaries. The exemption can be professed by a person salaried employee.

Special Exemption Cases:

  • The exemption limit for blind and orthopedically handicapped people is Rs. 3200 per month.
  • The conveyance allowance as per section 10(45), offered to the chairman or members of UPSC, is not charged to tax.

What does Transport Allowance Mean?

Transport allowance is the money that one receives from their employer for travelling from their home to the workplace and vice-versa.

Suppose one is an employee in the System of Transport who operates a transport from one place to another as a part of their official duty. In that case, conveyor allowance means the money one receives to meet their personal expenses acquired during the development of their official duty, granted the employee is not in receipt of the everyday allowance.

Who Receives Transport Allowance?

Not everyone gets the allowance for transportation. Only those workers whose employer specifically grants their CTC structure receive it. Thus, the relationship between employee and employer must endure as a precondition for obtaining the transport allowance. This implies all salaried individuals are eligible for getting an allowance for transport, and self-employed individuals cannot declare it.

Is Transport Allowance Taxable?

The aggregate amount of transport allowance earned is not taxable. The government recognizes the expenses as a genuine expense and thus wants to save one from the burden of paying heavy taxes. For this purpose, the amount collected as transport allowance is executed partially taxable, i.e., and under section 10(14)(ii) of the Income Tax Act is partially exempt.

How Much Tax Is Exemption On Transport Allowance?

The Transport Allowance means that the entire amount of transport allowance permitted is not tax-free. There are limits on tax exemption depending on their tax status.

These are :

On Transport Allowance, Limits of Tax Exemption

Transport Allowance provided:

  • For Salaried Individual (who is Non-Handicapped)- For a salaried employee, the Transport Allowance of Rs.1,600 per month is tax-free. Any amount earned in a surplus of Rs.1600 is taxable.
  • For a Handicapped Person- For employees who are handicapped, the Transport Allowance of Rs.3,200 per month is tax-free. The employees who are handicapped mean all the employees who are deaf or dumb or orthopedically handicapped or blind with the inability of lower extremities.
  • For employees of Transport System- Taxability for specified employees of the transport system, lower than 70 % of transport allowance or Rs.10,000 per month is tax-free. This exemption is provided to those employees who operate transport from one place to another as a part of their official duty and do not obtain a daily allowance.

For A.Y. 2018-19(F.Y. 2017-18), Transport Allowance Exemption

Persons: Yearly Tax Exemption(Rs./year.) & Monthly Tax Exemption(Rs./month)

Salaried Persons (Non-Transport Industry, Non-Handicapped)- 

  • (Rs./year.)- 9,200 Yearly Tax Exemption, and
  • (Rs./month)- 1,600 Monthly Tax Exemption

Handicapped Persons(Salaried)-

  • (Rs./year.)- 38,400 Yearly Tax Exemption
  • (Rs./month)- 3,200 Monthly Tax Exemption

Employees of Transport System-

  • (Rs./year.)- 70% of the amount received or 1,20,000 as Yearly Tax Exemption, whichever is less
  • (Rs./month)- 70% of the amount received or 10,000 as Monthly Tax Exemption, whichever is less

How Is The Calculation for Tax Exemption on Transport Allowance?

The calculation is straightforward for the tax exemption. All one has to prepare is just subtract the expense of tax exemption (depending on the limit applicable) from the cost received.

For instance

If one receives Rs. 2000 per month from their company as transport Allowance then their tax situation would be –

Amount of Allowance Received For Transport– Rs.2000/month

Less: As per law- Rs.1600/month Amount of Tax Exemption

Rs.400/month – Amount That is Taxable of Tax Exemption

Practice our free tax exemption utility under Transport Allowance specifically composed to calculate the amount that is tax-free on Transport Allowance.

Is There Any Difference Between Conveyance Allowance And Transport Allowance?

Many people are confused between the terms conveyance allowance and transport allowance and, while claiming tax exemption in their Income Tax Returns, execute significant mistakes.

Under Section 10(14)(ii) of the Income Tax Act, the Transport Allowance is covered. It is tax-exempt to the range of the amount declared by the Income Tax Department. Actual expenditure is not needed in order to declare the tax exemption.

Under Section 10 (14)(i) of the Income Tax Act, the Conveyance Allowance is covered. It is tax-exempt to the range of the amount actually spent for the official purpose for which it is furnished in order to declare the tax exemption. Tax benefit can be practised only when no free conveyance is granted for the same goal.

One should perceive that it is not compulsory to spend the entire amount of Transport Allowance collected in order to receive the benefit of tax exemption.

While Filing Income Tax Return, How can a Person Claim Transport Allowance?

Ordinarily, the employer of the company takes care that one is receiving the benefit of tax exemption on transport allowance at the time of deducting their TDS from their paycheck properly. Then, all one has to do is just register the amount mentioned in point 6 of their Form 16 part B in the Income from Salary column of their ITR Form.

But in case an individual wants to check whether their employer has furnished the firm a full tax benefit on transport allowance or the individual completely forgot to provide the tax benefit in their Form 16, then here is what one should do-

  • Firstly the individual must check their CTC structure from their salary slip.
  • Examine how much sum of the Transport Allowance is part of their CTC.
  • The whole amount must be tax-free if the CTC structure’s amount is less than Rs. 1600 per month.
  • If the sum in the CTC structure is higher than Rs.1600 per month, then the amount that will be tax-free would be to the limit of Rs. 1600 per month only.
  • Check Form 16 that the precise amount has been decreased from the Taxability of Salary Income.
  • If not lessened the correct amount in Form 16 from salary, then one can decrease it and can claim it in their ITR accordingly.

Expert Tip: “Check the CTC structure today, and if the Transport Allowance is not mentioned as the part of the CTC, request HR to restructure the CTC and save the Tax.”

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