What Is Conveyance Allowance?

Introduction

Conveyance allowance is a type of allowance provided by an employer to an employee to cover the expenses incurred by the employee while commuting between their place of work and residence. This allowance is intended to help employees meet the cost of transportation, such as the cost of public transport, taxis, or fuel expenses for personal vehicles. The amount of conveyance allowance provided by an employer is usually included in the employee’s taxable income and is subject to income tax. However, some exemptions and deductions are available under certain conditions, as per the Income Tax Act. It’s essential for employees to understand the conveyance allowance policy provided by their employer and maintain proper records of all expenses incurred while commuting.

Conveyance Allowance Exemption

Conveyance allowance may be exempt from income tax. Here are some scenarios where conveyance allowance may be exempt:

1. Employees with Disabilities: If an employee has a disability that makes it difficult for them to use public transport, the conveyance allowance provided to them for traveling to and from work may be fully exempt from income tax.

2. Night Shift Employees: If an employee works on night shifts, they may be eligible for a conveyance allowance to cover the cost of transportation back home after work. This allowance is fully exempt from income tax.

3. Employees Working in Remote Areas: If an employee is working in a remote area where public transport is not readily available, the conveyance allowance provided to them for traveling to and from work may be fully exempt from income tax.

4. Employees with Children Studying Abroad: If an employee’s child is studying abroad, the conveyance allowance provided to the employee for traveling to and from the airport or railway station while accompanying their child may be fully exempt from income tax.

Special Exemptions and Provisions

Apart from the exemptions mentioned earlier, there are some special provisions and exemptions related to conveyance allowance that employees should be aware of:

1. Employees with Own Vehicle: If an employee owns a vehicle and uses it for commuting to and from work, they may be eligible for a deduction of up to Rs. 1,600 per month (Rs. 19,200 per annum) from their taxable income under Section 17(2) of the Income Tax Act. This deduction is available only if the vehicle is used for both personal and official purposes.

2. Employees Working in Hilly Areas: If an employee is working in a hilly area where public transport is not readily available, the conveyance allowance provided to them for traveling to and from work may be fully exempt from income tax under Section 10(13A) of the Income Tax Act.

3. Employees Working in Vidarbha Region: If an employee is working in the Vidarbha region of Maharashtra, the conveyance allowance provided to them for traveling to and from work may be fully exempt from income tax under Section 37(1) of the Maharashtra State Sales Tax Act.

4. Employees Working in Special Economic Zones (SEZs): If an employee is working in a SEZ, the conveyance allowance provided to them for traveling to and from work may be fully exempt from income tax under Section 10(37) of the Income Tax Act.

Travel Allowances For Central Government Employees

Central Government employees are eligible for certain travel allowances, which are tax-free under specific conditions. Here are some travel allowances that Central Government employees may be eligible for:

1. Transport Allowance: This is a fixed amount provided to Central Government employees to cover the cost of commuting between their residence and workplace. The amount of Transport Allowance varies based on the employee’s location and is exempt from income tax under Section 10(14) of the Income Tax Act.

2. Daily Allowance (DA): This is an amount provided to Central Government employees to cover their expenses while traveling on official duty. The amount of DA varies based on the location and is exempt from income tax under Section 10(5) of the Income Tax Act.

3. Travelling Expenses: Central Government employees can claim a deduction for actual expenses incurred while traveling on official duty, such as airfare, train fare, and taxi fares, under Section 37(1) of the Income Tax Act.

4. Leave Travel Concession (LTC): This is a tax-free allowance provided to Central Government employees to cover the cost of traveling with their families during leave periods. The amount of LTC varies based on the employee’s location and is exempt from income tax under Section 10(5) of the Income Tax Act.

Recent Developments in Laws Governing Conveyance Allowance

Here are some recent developments in laws governing conveyance allowance:

1. Budget 2021: In the Union Budget 2021-22, the government announced that the Transport Allowance for Central Government employees will be increased from the current Rs. 1,600 per month to Rs. 2,400 per month (Rs. 28,800 per annum) for Class X and below officers and from Rs. 3,200 per month to Rs. 4,800 per month (Rs. 57,600 per annum) for officers of Class Y and above with effect from July 1, 2021.

2. Aadhaar-PAN Linking: The Income Tax Department has made it mandatory for all taxpayers to link their Permanent Account Number (PAN) with their Aadhaar by March 31, 2021. This move is aimed at curbing tax evasion and ensuring that all income is declared in the tax system. Failure to link PAN and Aadhaar by the deadline may result in a penalty of Rs. 500 and discontinuation of various services, including filing of income tax returns (ITRs).

3. New Income Tax Slabs: The Finance Minister announced new income tax slabs in the Union Budget 2021-22. Under the new slabs, individuals with an annual income of up to Rs. 3 lakh will not have to pay any income tax, while those earning between Rs. 3 lakh and Rs. 7 lakh will be taxed at a rate of 5%. The new slabs are expected to provide relief to middle-class taxpayers and encourage them to invest more in various sectors of the economy.

4. Digital Payments: The government has been promoting digital payments as a means of reducing cash transactions and curbing tax evasion. To encourage digital payments, the government has announced various incentives such as cashback offers and discounts on digital transactions through platforms like BHIM UPI, BHIM QR Code, and RuPay cards. These initiatives are aimed at making digital payments more convenient and accessible to all citizens, including those living in remote areas with limited access to banking facilities.

What are Form 16A & 16 B?

Form 16A and Form 16B are certificates of tax deducted at source (TDS) on income from sources other than salary¹. Form 16A is issued by financial institutions, tenants, or insurance companies to individuals who receive income from fixed deposits, rent, or commission²³. Form 16B is issued by property buyers to property sellers who earn income from the sale of immovable property¹⁴. Both Form 16A and Form 16B are required to file income tax returns in India².

How can you use Form 16 to your advantage?

Form 16 is a certificate issued by employers to their employees that shows the salary income and the tax deducted at source (TDS) on it¹. You can use Form 16 to your advantage in the following ways:

You can use Form 16 to file your income tax return easily and accurately, as it contains all the details of your income and deductions under various sections of the Income Tax Act¹.
You can use Form 16 to claim a refund of excess TDS deducted by your employer, if any, by filing your income tax return online².
You can use Form 16 to verify the TDS deposited by your employer with the Income Tax Department, by checking the Form 26AS online³. Form 26AS is a consolidated annual tax statement that shows all the taxes paid on your behalf by various sources, such as employers, banks, etc³.
You can use Form 16 to plan your tax-saving investments for the next financial year, by looking at the breakup of your salary and the deductions availed under Chapter VI-A of the Income Tax Act⁴. Chapter VI-A covers various deductions such as Section 80C, Section 80D, Section 80E, etc⁴.