Salary & compensation · Updated October 2026
Conveyance allowance is a fixed monthly sum for commuting, and as a flat amount it is fully taxable. The old Rs 1,600 a month exemption ended with FY 2017-18, when it was folded into the standard deduction. Tax relief today applies only to reimbursement of conveyance actually spent on official duties, plus a narrow transport allowance for specially-abled employees.
| Situation | Treatment |
|---|---|
| Flat monthly conveyance allowance in the pay structure | Taxable salary in both regimes, whether or not the employee travels |
| Conveyance paid to meet cost of travel in performing official duties (client visits, site rounds) | Exempt to the extent actually spent, in both regimes; commuting from home to office does not count |
| Transport allowance for a blind, deaf and dumb, or orthopaedically disabled (lower limbs) employee | Exempt up to a monthly limit, Rs 3,200 through FY 2025-26; the Income-tax Rules, 2026 are reported to raise it to Rs 15,000 plus DA in metros and Rs 8,000 plus DA elsewhere from FY 2026-27, so verify against the notified rule |
Because the exemption follows spending, a duty-travel claim needs bills, trip sheets or a mileage log, and anything left unspent is taxed. Payroll should run it as a reimbursement component, not a fixed allowance. The old and new regime comparison in old vs new tax regime explains why duty-related allowances survive while commuting allowances do not.
A separate, much narrower exemption exists for employees of transport undertakings (up to Rs 25,000 a month or 70% of the allowance, as reported for FY 2026-27). It does not apply to ordinary office staff.
Unlike special allowance, conveyance allowance is a named component with a purpose, and it is listed among the items excluded from “wages” under the Code on Wages, so it counts toward the 50% pool covered in the 50% wage rule. Unlike HRA, there is no part of it that is automatically tax free.
A fixed commuting allowance is taxable in both regimes. Only reimbursement for official-duty travel, and the specially-abled transport allowance, stay exempt under the new regime.
No. Home-to-office travel is personal, so the exemption does not cover it, though a reimbursement for genuine duty travel can.
From FY 2018-19 it replaced both the transport allowance exemption and the Rs 15,000 medical reimbursement. It is Rs 75,000 in the new regime and Rs 50,000 in the old regime for FY 2026-27, and applies to every salaried person.
See what a fixed allowance does to take-home in the Take-Home Salary Calculator.