Claiming I-T Exemption On Conveyance Allowance Under The New Tax Regime

The authorities have allowed taxpayers to guarantee I-T exclusion on conveyance allowance got from employers under the new regime of Income Tax Act, 1961. The Central Board of Direct Taxes (CBDT) has now amended Income Tax rules to recommend certain exemptions which can be profited by the taxpayers. These incorporate any allowance conceded to meet the expense of conveyance on visit or on move, any allowance, whether conceded on visit or for the time of journey regarding, to meet the normal every day charges brought about by the worker. Although conveyance allowance is also referred to as transportation allowance, it is not the same. While conveyance allowance covers the expense of conveyance for official purposes, transportation allowance is purely meant for travel or transportation related purposes. Under the old regime, the conveyance allowance of about  Rs. 19,200 per annum (Rs. 1600/month) is tax exempt under the Section 10 of the Income Tax Act 1961.

New Tax Regime

The CBDT has moreover clarified that while choosing estimation of perquisites, no tax exemption will be available for  free food and drinks rewards given by employer through paid vouchers.

“The CBDT via a notification dated June 26, 2020 has clarified that food coupons received by an employee who has opted for the new tax regime will be taxable in his hands. The notification has further clarified that any amount received as reimbursement for the cost of travel, daily expenses on transfer, tour allowance for travel for official purposes and conveyance allowance for meeting conveyance expenditure incurred in course of performing official duties will be tax-exempt. However, one must not get confused with conveyance allowance which was tax-exempt up to Rs 1600 per month till FY 2017-18 to meet the cost of travelling to and fro from home to office. This allowance is still taxable in the new as well as old tax regime.” says Naveen Wadhwa, Chartered Accountant, DGM, Taxmann

Further, disabled personnel, in need of a hearing aid and unfit to talk or orthopedically handicap laborers can moreover ensure uncommonly designated tax exemption of Rs 3,200 consistently while enrolling salaried compensation. Offering an optional lower pace of individual obligation to individuals, Finance Minister Nirmala Sitharaman in her Budget for 2020-21 proposed another optional tax regime under section 115BAC of the Income Tax Act for individuals prepared to forego certain foreordained inferences or prohibitions while enrolling full scale compensation for charge reason.

Under the new regime for income tax filing, yearly salary up to Rs 2.5 lakhs is absolved from tax. Those individuals procuring between Rs 2.5 lakhs and Rs 5 lakhs will pay 5 percent tax. Pay between Rs 5 and 7.5 lakhs will be taxed at 10 percent, while those between Rs 7.5 and 10 lakhs at 15 percent. Those gaining between Rs 10 and 12.5 lakhs will pay tax at the pace of 20 percent, while those between Rs 12.5 and Rs 15 lakhs will pay at the pace of 25 percent. Salary above Rs 15 lakhs will be taxed at 30 percent. Although the new tax regime foregoes many of the existing deductions under the Income Tax Act, it allows some exemptions along with the conveyance allowance. The exemption cover interest from the post office saving account, gratuity amount, life insurance maturity lump sum, EPF and NPS, interest and maturity amount from public provident fund (PPF), any investment and interest under Sukanya Samridhi Yojana, gift allowances, leave encashment on retirement, VRS amount etc.

The new I-T slabs would be most convenient for individuals not benefiting certain predetermined deductions or exemptions. “The notification also considers that it is employers’ responsibility to provide transport to employees with certain disabilities and therefore exempts allowance given to such employees for commuting to/ from office, even under new scheme”. Says Nangia & Co LLP Partner Shailesh Kumar.

“The notification considers free meals/ beverages provided by an employer to employees during office hours to be a personal benefit to employees and not an expenditure for official purposes. Therefore, similar to other allowances withdrawn under the new scheme/ slabs, tax exemption of such free meals/ beverages has been withdrawn under the new scheme”, Kumar added.

“Section 115BAC(2) prescribes a list of deductions/exemptions which are not available for deduction while computing total income if a taxpayer opts for a concessional tax regime. However, the provision empowers the CBDT to prescribe certain exemptions available under section 10 which can be availed by the employees”. Says Taxmann DGM Naveen Wadhwa

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