Khush Trivedi
Lets understand about the transport allowances treatment under income tax Act 1961
Table of Contents
What is allowances?
Allowances are monetary payments made by the employer to the employees for meeting specific expenditure.
Treatment under Income Tax act 1961
Under the Income-tax Act, 1961, allowance is taxable on due or receipt basis, whichever is earlier. Such allowances are generally taxable unless some specific exemption has been provided in respect of such allowances.
Transport allowances
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 fully taxable.
Exemption criteria
Under section 10(14)(ii) read with Rule 2BB
| Sr. no | Particulars | Exemption Limit |
| 1 | Salaried Persons (Other than Handicapped Non-Transport industry( with effect from FY:18-19 no such separate allowances is allowed ) | Rs. 1,600 per month |
| 2 | Handicapped persons (Salaried) | Rs. 3,200 per month |
| 3 | Employee of Transport System | 70% of the Amount received or Rs. 10,000, Whichever is less. |
Illustration
Let's take an example
Mr. X getting Rs. 4,000 p.m transport allowance form his employer let us find taxable transport allowances under various circumstances.
- He is Salaried Persons (Non-Handicapped, Non-Transport Industry) for FY: 17-18 & FY: 18-19 onwards
- He is a Handicapped Person (Salaried)
- He is an Employee of the Transport System
He is Salaried Persons (Non-Handicapped, Non-Transport Industry)
| Particulars | FY: 17-18 | FY: 18-19 Onwards |
| Transport allowance received | 4800000% | Rs 48,000 |
| (4000*12) | (4000*12) | |
| Less: | ||
| Exempt u/s 10(14)(ii) | Rs 19,200 | 0 |
| (1600 p.m) | (1600*12) | |
| Taxable Transport Allowance | Rs 28,800 | 48,000.00 |
He is a Handicapped Person (Salaried)
| Particulars | Amt |
| Transport allowance received | 4800000% |
| (4000*12) | |
| Less: | |
| Exempt u/s 10(14)(ii) | Rs 38,400 |
| (Rs.3,200 p.m) | (3200*12) |
| Taxable Transport Allowance | Rs 9,600 |
He is an Employee of the Transport System
| Particulars | Amt |
| Transport allowance received | 4800000% |
| (4000*12) | |
| Less: | |
| Exempt u/s 10(14)(ii)(WN:1) | Rs 10,000 |
| 70% of Amount Recd. Or Rs. 10,000 We. Less | |
| Taxable Transport Allowance | Rs 38,000 |
WN:1
| Particulars | Amount Received | 48,000.00 |
| (i) | 70% | 33,600.00 |
| (ii) | Rs.10,000 | 10,000.00 |
| Lower of (i) & (ii) | 10,000.00 |
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