Conveyance Allowance

What is Conveyance Allowance?

Conveyance Allowance, also called Transport Allowance, is a salary component that historically reimbursed Indian employees for the cost of commuting between home and office. It is paid as a fixed monthly amount included in the gross salary, with no requirement to submit travel bills. Until FY 2017-18 it carried a flat tax exemption of Rs 1,600 per month under Section 10(14)(ii) of the Income Tax Act, 1961 read with Rule 2BB(2) of the Income Tax Rules, 1962. The Finance Act, 2018 withdrew this exemption for general employees from 1 April 2018 and replaced it (along with the Rs 15,000 medical reimbursement) with a Standard Deduction of Rs 40,000 under Section 16(ia).

Today, Conveyance Allowance survives in CTC structures more out of habit than tax planning. It appears as a payslip line, but is fully taxable salary for nearly every employee. Only employees with specified disabilities continue to enjoy a meaningful exemption.

Tax Treatment

Section 10(14) of the Income Tax Act allows the central government to notify allowances that are exempt from tax. Rule 2BB(2) of the Income Tax Rules sets out the prescribed allowances and limits. Conveyance Allowance for commuting between residence and place of duty was historically prescribed at Rs 1,600 per month (Rs 19,200 per year), or Rs 800 per month before FY 2015-16.

The Finance Act, 2018 introduced Section 16 Standard Deduction of Rs 40,000 specifically to replace the Conveyance Allowance and Medical Reimbursement exemptions. The Standard Deduction was raised to Rs 50,000 from FY 2019-20 and to Rs 75,000 in the new tax regime from FY 2024-25.

After the change:

• General employees: Conveyance Allowance is fully taxable. The Standard Deduction substitutes, with no need for documentation
• Employees with disabilities: Rs 3,200 per month exemption under Rule 2BB(2)(11) survived and continues
• Employees of a transport business who do not earn a daily allowance: a special exemption under the same rule continues to apply

The exemption for employees with disabilities is available under both tax regimes, including the new tax regime under Section 115BAC, making it one of the rare allowances that escapes the new regime’s general clampdown.

Calculation Example

Consider an employee in Pune on Rs 10,00,000 annual CTC with a Conveyance Allowance of Rs 1,600 per month built into the salary.

Pre FY 2018-19 (illustrative, no longer applicable):

FY 2025-26 (current):

For an orthopedically handicapped employee in the same role:

The exemption for the disabled employee compounds with the Standard Deduction; both apply.

Common Employer Pitfalls

1. Continuing to tag Conveyance Allowance as exempt in payroll software. Many older payroll templates still mark Rs 1,600 per month as exempt by default. The TDS shortfall surfaces during the year-end Form 16 reconciliation and creates last-quarter recovery deductions that employees notice and dispute.
2. Missing the disability exemption. When an employee has a valid disability certificate, the Rs 3,200 per month exemption applies but is often overlooked because most payroll systems assume it is gone. Confirm during onboarding and again whenever the disability status is updated.
3. Confusing Conveyance Allowance with reimbursement of official travel. Reimbursement for a specific business trip is exempt under Section 10(14)(i) to the extent actually incurred and is separate from the monthly Conveyance Allowance. They should be on different payslip lines.
4. Forgetting that Standard Deduction needs no documentation. Some employees still ask for Conveyance Allowance bills. None are needed for either the (now-defunct) general exemption or the Standard Deduction. Documentation is only relevant for disability certificates and for actual official-travel reimbursements.

Recent Changes and 2026 Updates

The Standard Deduction now stands at Rs 75,000 under the new tax regime (FY 2024-25 onwards) and Rs 50,000 under the old tax regime. The Finance (No. 2) Act, 2024 also raised the family pensioner deduction to Rs 25,000 in the new regime. None of these changes restored the Rs 1,600 per month Conveyance Allowance exemption for general employees; the policy direction continues to favour a single Standard Deduction over multiple small exemptions.

The disabled employee exemption of Rs 3,200 per month under Rule 2BB(2) has not been amended since the 2018 restructuring and is expected to remain in force.

For a fuller picture of how Conveyance Allowance fits with other salary components, see the guide to Indian salary structures and CTC.

How Omnivoo Handles Conveyance Allowance

Omnivoo treats Conveyance Allowance as taxable by default and adds the Standard Deduction automatically based on the employee’s chosen tax regime. When a disability certificate is uploaded during onboarding, the platform switches the employee’s Conveyance Allowance to exempt up to Rs 3,200 per month under Rule 2BB(2)(11) and surfaces the higher net pay on the next payslip. Employees do not need to submit petrol bills or autorickshaw receipts; the calculation runs automatically every month.