Conveyance Allowance

Conveyance Allowance is an allowance provided by employers to employees to cover their expenses for commuting to and from work. In simple terms, it is an amount given to employees to help with their travel costs related to work.

Tax implications of conveyance allowance

Taxable as perquisites – Conveyance allowance is considered a taxable perquisite, which means it is subject to income tax in the hands of the employee.

Exemption for specific limits – However, there is an exemption available for conveyance allowance up to a certain limit, typically set at ₹1,600 per month.

Actual expenses vs. exemption – If the conveyance allowance exceeds the exemption limit, the excess amount is added to the employee’s taxable income.

Supporting documentation – To claim the exemption, the taxpayer may need to provide evidence such as transport tickets or any other relevant proof of actual expenses incurred for commuting.

Employer’s responsibility – It is the employer’s responsibility to calculate the conveyance allowance, deduct the appropriate taxes, and provide the necessary documentation for tax purposes.

Proper record-keeping – The employee should maintain records of commuting expenses and supporting documents in case of scrutiny by tax authorities.