The latest thinking of the Government of India, Ministry of Finance, is that the conveyance allowance would be taxable as income specially if it has got a component of compensating the employee in respect of the expenditure so incurred by the employee on conveyance expenditure from office to residence and residence to office.
It is further clarified that any allowance, by whatever name called, granted by an employer, which has the element of compensation of the expenditure incurred on commuting from residence to office or vice versa, will also not qualify for the benefit under Section 10(14)(i).
Transport allowance granted to an employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty is exempted upto 800 per month.
Thus, in view of the above amendment if an employee receives transport allowance upto a maximum of 800 p.m. wef 1-8-1997 the same will he exempt from income tax even when the same is for commuting and back from office.
The limit of exemption in respect of Transport Allowance for handicapped employees is 1,600 per month.