May 062016

Transport Allowance, Rules, Exemption in Income tax in 7th Pay Commission

Transport allowance given to the Govt. employees is also termed as the Conveyance allowance. It is a special type of incentive given by the Govt. to its employees for the cost incurred in travelling from their homes to their work destinations.

Transport Allowance Rules Tax exemption 1

  • What is the limit of per annum transport allowance for which tax exemption is given?

As per the regulations of the 6th pay commission, the amount of travel allowance per annum on which no tax will be charged is set to be Rs. 19,200. This is the maximum limit of travel allowance or convenience allowance which an employee can have to get tax exemptions. This limit is set from the financial year of 2015 – 2016. Before that, the previous limit of travel allowance per annum for which tax exemption was given was Rs. 9,600. However there is no such guideline on what is the maximum travel allowance one can get. But to get tax exemptions, the annual tax allowance must be within Rs. 19,200.

  • Section of Income Tax applicable for exemption in transport allowance

There are two sections of IT Act under which the tax exemption for the transport allowances are mentioned. But the permissible limit of transport allowance is Rs. 19,200. This amount is for one year’s total transportation costs. This stands to Rs. 1,600 per month of travel allowance. However some recommendations have been made in terms of alterations in the travel allowance in the new 7th pay commission.

  • Transport allowances recommendations under the 7th pay commission

In this new 7th CPC, a major change has taken place in the structures of the transport allowances. Earlier, there was a set of 19 cities which were marked as A1/A cities. These cities had greater transport allowances compared to other cities or towns. But this terminology to mark these cities as A1/A cities has been changed. The employees of these cities will still be receiving higher transport allowances compared to other cities. But the category has been altered and named.  These cities receive this extra benefit of high travel allowance as the travelling and transportation costs are higher.

  • Transport allowance details as per the 7th pay commission:

Sl. No. Attributes Related Data
1 Name of allowance Convenience Allowance / Transport Allowance
2 Total no. of Higher TPTA cities 19 cities
3 Higher TPTA cities names Delhi, Kolkata, Bangalore, Hyderabad, Chennai, Mumbai, Kanpur, Nagpur, Jaipur, Lucknow, Pune, Surat, Ahmedabad, Patna, Indore, Kochi, Kozhikode, Ghaziabad, Coimbatore.
4 TA for 1 – 2 pay level (Higher TPTA cities) Rs. 1,350 + DA
5 TA for 1 – 2 pay level (Other places) Rs. 900 + DA
6 TA for 3 – 8 pay level (Higher TPTA cities) Rs. 3,600 + DA
7 TA for 3 – 8 pay level (Other places) Rs. 1,800 + DA
8 TA for 9 and above pay level (Higher TPTA cities) Rs. 7,200 + DA
9 TA for 9 and above pay level (Other places) Rs. 3,600 + DA
10 TA for officers of pay level 14 and above Rs. 15,750 + DA
11 Minimum TA for disabled employees Rs. 2,250 + DA
12 Sections of Inx=come Tax exemptions on Transport allowance Section 10 (14) ii of the Income Tax Act as well as Rule 2BB of the Income Tax Rules
  • Effect of Dearness Allowance on Transport allowance

At present the Dearness Allowance (DA) of the central govt. employees is 125 %. This will become zero after the full implementation of the 7th pay commission. The transport allowance of an employee is directly proportional to the DA. This means as the amount of Dearness allowance increases, the convenience allowance also increases. As a matter of fact, currently, the central govt. employees are getting 125 per cent of DA along with their normal salary. This means they are also getting a smart share of transport allowance along with it. But after the 7th pay commission gets implemented, the DA will again come down to zero and start from there.

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