The Income Tax Department has allowed individuals to claim income tax exemption on conveyance allowance received from employers under the new optional income tax regime for FY 2020-21 that offers lower tax rates.
The Central Board of Direct Taxes (CBDT) has now amended the income tax rules to prescribe certain exemptions which can be availed by salaried individuals.
These include any allowance granted to meet the cost of travel on tour or on transfer, any allowance, whether, granted on tour or for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
It also includes an exemption for any allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office or employment of profit, provided that free conveyance is not provided by the employer.
The CBDT has further clarified that while determining the value of perquisites, no exemption will be available in respect of free food and non-alcoholic beverage provided by employer through a paid voucher.
Further, blind, deaf and dumb or orthopedically handicap employees can also claim ad-hoc exemption of transport allowance of Rs 3,200 per month while computing salaried income.
The new optional income tax regime offered at lower rates to individuals was introduced for the current financial year 2020-21 by the government to encourage income tax return filings. In the Budget 2020, FM Nirmala Sitharaman had announced that these lower rates would be offered under section 115BAC of I-T Act is for individuals willing to forego certain specified deductions or exemptions while computing total income for tax purpose.