Transport Allowance and Exemption for 2018-19

Meaning of Transport Allowance:

Transport Allowance under Section 10(14) of Income Tax Act 1961 r/w Rule 2BB of Income Tax Rules has been defined as the allowance granted to an employee to commute between his place of residence and place of duty or an allowance granted to a person employed in transport business to meet his personal expenditure of commuting from one place to another during his course of employment provided he does not receive a daily allowance. Transport allowance is usually offered by the employer when the company does not offer any transport facilities to the employee. The allowance becomes taxable if it crosses the exemption limit.
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Transport Allowance Exemption

Section 10(14) of the Income Tax Act and Rule 2BB of the Income Tax Rules lays down the exemption provisions of the Transport Allowance. It lays down 3 conditions:

1. Exemption on Transport Allowance of Rs.1600 per month or Rs.19200 per annum for commuting from place of residence to place of duty.
2. Exemption on Transport Allowance of Rs.3200 per month or Rs.38400 to commute from place of residence to place of duty for physically challenged like blind, deaf, dumb, or orthopedically handicapped.
3. Exemption on: a) 70% of Transport Allowance or; b) Rs.10000 per month for employees of transport business for meeting personal expenditure during the course of employment.[1]
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How to Claim Exemption of Transport Allowance

The employer of non-transport business needs not to provide any proof of expenditure for commuting from residence to place of duty to claim the exemption and further the exemption limit is fixed and is available irrespective of actual expenditure. The only requirement is that the employee should not have been already furnished with office transport.

And in the case of employees of the transport business, to claim exemption, they shouldn’t be receiving a daily allowance.

Implementation of Recommendations of 7^th Central Pay Commission

As per recommendations of the CPC, the President has prescribed the following rates for transport allowance to Central Government employees:[2]

The cities mentioned in the Annexure include Hyderabad, Patna, Delhi, Ahmedabad, Surat, Bengaluru, Kochi, Kozhikode, Indore, Greater Mumbai, Nagpur, Pune, Jaipur, Chennai, Coimbatore, Ghaziabad, Kanpur, Lucknow, and Kolkata.

CPC further lays down certain conditions for grant of Transport Allowance which are as follows:[3]

1. Employees getting the facility of Government transport shall not be entitled to this allowance.
2. Employees continuing in their pre-revised pay structure shall get their allowance as per the Level in Pay Matrix as indicated in CCS (Revised Pay) Rules, 2016.
3. Physically disabled employees categorized as visually impaired, deaf/dumb orthopedically handicapped, or deformed would be granted transport allowance double the normal rates, the minimum being Rs.2250 plus DA.
4. Employees drawing salary in Levels 14 and above in the Pay Matrix who are also given the privilege to use the official cars are given the option to either avail the Official Transport facilities or draw Transport Allowance of Rs.15750 per month. The option of drawing Transport Allowance is to be examined by the Administrative Ministry while the option of availing an official car facility is to be examined by other competent authorities. Once the choice has been made by the employee, he is not allowed to change his option in the remaining period of his current assignment.
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Special Circumstances where Transport Allowance is Permitted:

1. During training treated as Duty- If no Transport Facility or Daily Allowance is provided for attending the training institute, the employee is entitled to Transport Allowance.
2. Transport Allowance is given to compensate the expenditure incurred when the inspection/ duty by Members of Special Parties within the city exceeds 8 km. from the Headquarters or when there is continuous field duty either in or outside the Headquarters. But Transport Allowance is not permitted in case a daily or Road Mileage allowance is provided.
3. Vacation Staff is entitled to Transport Allowance only if the free transport facility is not provided.
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Circumstances where Transport Allowance is not Permitted:

1. During Leave- When the whole calendar month is covered by leave, transport allowance is not granted.
2. During Deputation Abroad- No allowance is granted during a period of deputation abroad.
3. During tour- Transport Allowance is not granted for employees absent from the place of posting for full calendar month due to tour.
4. During Training: If the training covers the whole calendar month, no allowance shall be granted.
5. During Suspension- No transport allowance is provided to Government employees who are suspended for the full calendar month and are thus not required to attend office.
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Finance Act of 2018

The Finance Act 2018 introduced a change in the Transport Allowance providing nominal benefit to the salaried. It introduced a standard deduction of Rs.40000 per annum for employees in lieu of the present transport allowance exemption and reimbursement of medical expenses. This proposition has thus led to a total tax-free salary of Rs.34200 per annum which includes Rs.19200 of Transport Allowance and Rs.15000 of Medical expense Reimbursement.[4]

[1] Income Tax Act 1961, s 10(14)

[2] 7^th Central Pay Commission, Office Memorandum (No. 21/5/2017- E.II(B))

[3] ibid

[4] Pragati Kapoor, ‘ Budget 2018 gives Rs.40000 standard deduction, removes other allowances: Salaried may be left poorer’ Economic Times ( Delhi, 14 February 2018)