Guide to .. Tax Management ,Tax Planning and Tax Saving

 

 

"Conveyance And Transport Allowances Are Completely Exempted From Tax"

 

Rule 2BB provides that any allowance granted to meet the expenditure incurred on conveyance in the performance of the duties of an office of employment or profit for the purposes of Section 10 (14) (i) of the Income Tax Act. This would be completely exempted from income tax in case free conveyance is not provided by the employer.

What would be required to be produced by the employee concerned would be a certificate that the entire conveyance allowance has been spent by him in the discharge of his duties of office.

If any employee saves on account of the conveyance allowance, then the amount not so spent but saved by him would be considered as taxable income of the employee concerned.

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.

Related Topics .... Salary-Perquisites

 

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