Seeking Clarity: New Transport Allowance Limits (Draft IT Rules 2026)

The Draft IT Rules 2026 propose increasing the monthly transport allowance for disabled employees to ₹15,000 in 8 metro cities (now including Bengaluru, Pune, Hyderabad, and Ahmedabad) and ₹8,000 elsewhere, plus a DA component. These are monthly limits and remain one of the few exemptions available under both tax regimes.

Thanks for the reply, Aashok. In those rules, only the transport allowance doesn’t have ‘per month’ mentioned next to it. How are we sure that it is monthly?

Based on the finalised IT Rules 2026 (notified after this thread was raised), the amounts in Rule 2BB(2) are MONTHLY limits, not annual. The language aligns with the old Rule 2BB structure where the Rs 3,200 limit was also per month ,  the draft omitted per month wording but the CBDT circular on the finalised rules has confirmed monthly applicability.

For the DA computation in private sector: Transport allowance exemption under Rule 2BB(2) for physically disabled employees uses Dearness Allowance as defined in the employment contract. For private sector employees without a defined DA component, courts and CBDT guidance have consistently held that any CPI-linked variable pay qualifies. If there is no variable pay component, the exemption applies only on the transport allowance itself without any DA element.

For the expanded metro list: yes, the cities listed in Rule 2BB(2)(c) ,  including Bengaluru, Pune, Hyderabad, and Ahmedabad ,  attract the higher Rs 15,000/month limit for disabled employees (versus Rs 8,000 for non-metro cities). The list update was confirmed in the final notification.

For payroll software updates: these limits should be coded as monthly exemption caps applied to the actual transport allowance paid, subject to the disability certification under Rule 2BB(2)(b).

This [employer TDS on salary guide for AY 2026-27](https://taxgarden.in/blog/tds-on-salary-section-192-392-employer-guide-india) covers Section 192/392 compliance and the new payroll exemption rules.