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CA Intermediate · Taxation · Salaries

Mr. Arjun Nair, a salaried employee of a private company in Kochi, receives a monthly salary of ₹60,000 and a monthly conveyance allowance of ₹5,000 for travelling between home and office. He has not been given any official-duty travel assignment. For tax year 2026-27, how will the conveyance allowance be treated in computing his salary income?

The conveyance allowance is fully taxable as salary. It compensates for travel between home and office, which is a personal expense and not a cost of official duty, so no exemption applies and the whole ₹5,000 per month is included in salary income.

  1. AFully taxable as part of salaryCorrect
  2. BFully exempt up to ₹1,600 per month
  3. CExempt up to ₹5,000 per month if he submits bills
  4. DFully exempt because it is a transport allowance

Explanation

An allowance for commuting between residence and office is a personal expense and is not granted to meet expenses of official duty. Hence the entire ₹5,000 per month (₹60,000 a year) is taxable as salary. The old flat exemption for transport allowance is not available, so the options suggesting exemption are wrong.

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