What is Conveyance Allowance? - Definition & Exemption

Introduction

Every month, when you receive your salary slip, you likely see a list of various allowances added to your basic pay. While some allowances, such as House Rent Allowance (HRA), are well-understood, others, like Conveyance Allowance, often raise questions. Is it fully taxable? Do I need to submit petrol bills to claim it? Why is the exemption limit so low?

For years, the Conveyance Allowance has been a standard tool for employers to structure salaries tax-efficiently. However, with the introduction of the Standard Deduction and the push towards the New Tax Regime in 2025, the rules of the game have changed.

It is crucial to understand that Conveyance Allowance is not the same as Transport Allowance. One is for official duty, and the other is for commuting to work. Confusing the two can lead to errors in your tax planning. In this guide, we will decode the purpose of Conveyance Allowance, the exemption limits available under Section 10(14), and how it impacts your tax liability in the current financial year.

Table of Contents

1. What is Conveyance Allowance?
2. Conveyance vs. Transport Allowance: The Key Difference
3. Exemption Rules under Section 10(14)(ii)
4. Taxability in New Tax Regime (FY 2025-26)
5. Exemption for Differently-Abled Employees
6. Do You Need to Submit Bills?
7. Consolidated Travelling Allowance
8. Conveyance Allowance for Partners in a Firm
9. How to Calculate Taxable Conveyance Allowance
10. FAQs

What is Conveyance Allowance?

Conveyance Allowance is an allowance granted by an employer to an employee to meet the expenditure incurred on conveyance in the performance of duties of an office.

In simple terms, if your job requires you to travel from your office to a client's site, a vendor's factory, or a bank, and you use your own vehicle or public transport, the company pays you an allowance to cover these costs. This is separate from the cost of commuting from your home to the office.

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Conveyance vs. Transport Allowance: The Key Difference

This is where most taxpayers get confused. The Income Tax Act distinguishes between travel for "duty" and travel for "commute."

1. Conveyance Allowance: Paid for travel during office hours for official work (e.g., Office $\leftrightarrow$ Client Site).

Tax Status: Exempt to the extent of actual expenditure incurred.

1. Transport Allowance: Paid for commuting between Residence and Office.

Tax Status: Fully Taxable for general employees (since it was subsumed into the Standard Deduction).

Exemption Rules under Section 10(14)(ii)

Conveyance Allowance is exempt under Section 10(14)(ii) of the Income Tax Act. The exemption rule is simple:

Exemption = Lower of (Allowance Received OR Amount Actually Spent)

• Example:

  1. Allowance Received: ₹5,000 per month.
  2. Actual Money Spent on Official Travel: ₹3,000 per month.
  3. Exempt Amount: ₹3,000.
  4. Taxable Amount: ₹2,000.

If you receive the allowance but do not spend anything on official travel (e.g., you sit in the office all day), the entire amount is fully taxable.

Taxability in New Tax Regime (FY 2025-26)

The New Tax Regime (Section 115BAC) has removed most exemptions to simplify the tax structure.

• Old Tax Regime: You can claim exemption for Conveyance Allowance if you actually incur the expense.
• New Tax Regime: Conveyance Allowance granted to meet the expenditure incurred on conveyance in the performance of duties of an office IS EXEMPT.

Wait, isn't the New Regime supposed to remove exemptions?

Yes, but Section 10(14) allowances required for performing official duties (like Conveyance, Tour, and Daily Allowance) are still exempt under the New Tax Regime. However, Transport Allowance (Home to Office) is NOT exempt.

Exemption for Differently-Abled Employees

While Transport Allowance (Home to Office) is fully taxable for general employees, the government provides relief to differently-abled employees.

For employees who are blind, deaf, and dumb, or orthopedically handicapped with disabilities of the lower extremities:

• Exemption Limit: ₹3,200 per month (₹38,400 per year).
• This exemption is available under both Old and New Tax Regimes.

Do you need to Submit Bills?

Strictly speaking, yes.

Since the exemption is based on "actual expenditure incurred," you must maintain a logbook or proof (fuel bills, taxi receipts) to justify the claim if scrutinized.

• Employer Policy: Most employers require you to submit bills to make that portion tax-free in Form 16. If you don't submit bills, the employer will deduct TDS on the full amount. You can technically claim it while filing ITR, but you risk an inquiry if you don't have proof.

Consolidated Travelling Allowance

Some companies do not pay a separate Conveyance Allowance. Instead, they pay a "Consolidated Travelling Allowance."

• Rule: This is also exempt under Section 10(14) to the extent of actual expenditure incurred for official purposes.
• Condition: The employee should not be in receipt of any other daily allowance for the same period.

Conveyance Allowance for Partners in a Firm

Partners in a partnership firm are not "employees." Therefore, they do not get "salary allowances" in the traditional sense.

However, if the partnership deed authorizes the payment of conveyance expenses to partners for official business travel, these are treated as Business Expenses for the firm (deductible from the firm's profit) and are generally not taxed in the hands of the partner if they are reimbursements of actual expenses.

How to Calculate Taxable Conveyance Allowance

Let's calculate the tax liability for Mr. Arjun.

• Allowance Received: ₹4,000/month (₹48,000 annually).
• Actual Official Spend: ₹2,500/month (₹30,000 annually).
• Unspent Amount: ₹1,500/month (₹18,000 annually).

Tax Calculation:

• Exempt: ₹30,000 (Amount spent).
• Taxable: ₹18,000 (Unspent amount added to salary income).