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New tax regime: Now claim exemptions on daily travel and conveyance allowances

But meal coupons and cards remain out of bounds; negotiate with your employers to incorporate this amount into your regular pay instead

June 29, 2020 / 04:25 PM IST

Salaried employees who chose the new tax regime and had to let go of a host of tax exemptions can heave a sigh of relief, as daily travel and conveyance allowances are now tax-exempt.

The Central Board of Direct Taxes (CBDT) has amended rules under the new, optional tax regime introduced in Union Budget 2020, to allow tax exemptions on tour, transfer, daily travel and conveyance allowances.

Conveyance allowance now tax-exempt in new regime

The CBDT has offered more concessions to these tax-payers. It has amended Rule 2BB, which allows exemption claim under section 10(14) in respect of salaried employees opting for the new tax regime under section 115BAC. “It has clarified that such employees can claim exemptions under the section specifically for these allowances – expenses incurred on official tours, transfers to another location and conveyance incurred for official duties,” says Sandeep Sehgal, Director, Taxes and Regulatory, AKM Global, a tax consulting firm.

Daily travel allowance is the amount usually spent by employees carrying out official duties. Conveyance allowance refers to the expenses incurred while commuting between home and workplace. For differently-abled employees, transport allowance – that is, allowance extended for commuting between home and office – of up to Rs 3,200 per month will not attract any tax.

In case these allowances have been treated as taxable income and taxed as per your slab rate during April, May and June, your employer will make adjustments in the months to come. “The companies can revise the tax computation for employees and hence the tax deductible for ensuing months will be adjusted accordingly,” adds Sehgal.

Renegotiate meal coupon component in salaryHowever, the leeway has not been extended to meal coupons or vouchers for free food and non-alcoholic beverages that many employees receive as part of their remuneration. “This component will continue to be taxable in the new regime. The tax would be would the same as on regular salary. Therefore, it is better to convert meal coupons to regular pay,” says Karan Batra, CEO and Founder, Chartered Club.

You can negotiate with your employer to pay an equivalent sum as part of your regular salary instead. However, before that, review your meal cards’ terms and conditions and acceptability across merchants to ascertain their utility. Given that a partial lockdown continues in several big cities in India, you would do well to focus specifically on acceptability of these cards on e-commerce platforms before taking the final call.

Preeti Kulkarni
first published: Jun 29, 2020 04:25 pm