Transport allowance + Daily conveyance

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varun gupta (Querist)
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08 June 2009 A company pays salary to its staff and there is a component of Transport allowance of Rs 800 p.m. Other than that, it also pays daily conveyance for home to office(to & fro). Now, whether any of them attract FBT for employer or any of them will be taxable in hands of employee?

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)
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08 June 2009 The above components do not attract FBT.

The relevant circular is reproduced below:

Reply to your query lies in the following clarification provided by CBDT in circular no No. 8 dated 29 August 2005 at question no 104 -

Whether expenditure incurred by the employer for the purposes of providing free or subsidized transport for journeys to employees from their residence to the place of work or such place of work to the place of residence would attract FBT?
The free or subsidized transport provided to employees for journeys from their residence to the place of work or such place of work to the place of residence is in lieu of conveyance/transportation allowance, which is not liable to FBT. Accordingly, the expenditure incurred by the employer for the purposes of providing free or subsidized transport for journeys to employees from their residence to the place of work or such place of work to the place of residence will not be liable to FBT.

Thus the free transport limited only to transportation from residence of office and back is not liable to FBT. For any other free transportation facility is covered under FBT

varun gupta

varun gupta (Querist)
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08 June 2009 Thanks Nitin. But in this case company is paying fixed transport allowance to employee which i think is also exempt considering it to be used for travelling from home to office. While daily out of pocket exp for home to office transport is being paid seperately. So will not now one of them be taxable either for employer or employee?

SUBRAMANYA H

SUBRAMANYA H (Expert)
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08 June 2009 Fixed allowence paid through pay roll is taxable in hands of employee, but conveyance attowence @ 800pm is exempted under sec 10

daily outof pocket expenses to employee for conveyance is lable for FBT in hands of employer

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)
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18 June 2009 In my opinion, both will be non-taxable.

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