You can claim an exemption on conveyance allowance received from your employer if you are going to opt for the new income tax regime that offers lower tax rates. A notification has been issued that amends rules. It permits those taxpayers who choose the new tax regime to claim an exemption for allowance to satisfy travel cost and daily expenses on transfer, tour allowance for travel for official purposes to fulfill the travel and daily expenses, and conveyance allowance for meeting conveyance expenditure incurred in course of performing official duties by the Central Board of Direct Taxes (CBDT). And the transport allowance for the handicapped employees who commute to and from office is additionally tax exempted.
An exemption under Section 10(14) is open for employees choosing a new tax regime, but meal coupons, etc are going to be out of exemption conveyance & travel allowance are going to be available. CBDT clarified that such an assessee could claim exemption u/s. 10(14) only in respect of Tour/Transfer allowance, Daily travel allowance, conveyance allowance and Transport allowance for handicapped, subject to the conditions.
From the assessment year 2021-22, the new rules and guidelines will come into action. Daily travel allowance is that 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.
Under the new income tax slab with a lower tax rate, annual income up to Rs 2.5 lakh is exempt from tax. Those individuals earning between Rs 2.5 lakh and Rs 5 lakh pay 5 percent tax. Income between Rs 5 lakh and Rs 7.5 lakh is going to be taxed at 10 percent, whereas those who fall under between Rs 7.5 lakh and Rs 10 lakh at 15 percent. Those earning between Rs 10 and 12.5 lakh pay tax at the rate of 20 percent, while those between Rs 12.5 and Rs 15 lakh pays at the rate of 25 percent. Income above Rs 15 lakh is taxed at 30 percent.