Question
Download Solution PDFMr. X is entitled to transport allowance of Rs. 1,800 p.m. for commuting from his residence to office and back and he spends Rs. 1,400 p.m. The exemption shall be allowed of
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFImportant PointsBoth Transport and Medical allowances were available till FY 2017-18. However, from FY 2018-19, the standard deduction was introduced in lieu of transport allowance and medical reimbursements.
If these two allowances are still part of your salary components, then the amount received by you is fully taxable.
Key Points
Transport allowance means an allowance given for the purpose of transport.
Transport allowance u/s 10(14) of the Income Tax Act, 1961 read with rule 2BB of Income-tax rules can be either of the following:
- Allowance granted to an employee to meet his expenditure for the purpose of commuting between his place of residence and office.
- Allowance granted to an employee working in transport business to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided the employee is not in receipt of the daily allowance.
Before FY 2018-19, Following were the provision for exemption of Transport Allowance.
Quantum of Exemption:
Section 10(14) read with Rule 2BB states the exemption of transport allowance as follows:
|
Transport allowance for commuting from place of residence to place of duty (with effect from FY 2018-19 no such seperate transport allowance is allowed) |
Rs. 1,600 p.m. or Rs. 19,200 p.a. |
| Transport allowance for commuting from place of residence to place of duty for an employee who is physically challenged such as blind/deaf/dumb or orthopedically handicapped with disability of lower extremities | Rs. 3,200 p.m. or Rs. 38,400 p.a. |
| Transport allowance for employee of transport business for meeting personal expenditure during running of such transport |
Lower amount of the following: i) 70% of allowance or ii) Rs. 10,000 p.m. |
Therefore, Mr. X shall be allowed for an exemption of Rs. 1600 p.m.
“Did you know that it is not mandatory to spend the complete amount of Transport Allowance received in order to get the benefit of tax exemption!”
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