Conveyance Allowance in Salary: Limits and How to Calculate

Two people at the same company have a line called conveyance allowance on their payslip. One of them spends the week driving between client sites. The other takes the same bus to the same office every morning.

Payroll pays both the same way. The Income-tax Rules do not treat them the same at all, and that single distinction decides whether the money is taxed.

This guide covers the position under the Income-tax Act, 2025 and the Income-tax Rules, 2026, which replaced the old law on 1 April 2026. It explains what conveyance allowance is, what is exempt, how to work the exempt amount out, and what changed this year for employees with a disability. House rent allowance and the perquisite rules sit in separate provisions and are not covered here.

This guide is written for whoever owns the salary structure: an HR manager, a payroll executive, or an owner doing both jobs on a Sunday.

What Conveyance Allowance Means on a Payslip

The meaning is straightforward once you separate two payslip lines that share a name and very little else. Get this part right and the rest of the post is arithmetic.

There are two allowances, and two different rules:

1. Conveyance allowance pays for travel done in performing the duties of the job. Visiting a supplier, moving between branches, reaching a customer site.
2. Transport allowance pays for the daily journey between home and the workplace. Getting to work is not part of the work.

Rule 280 of the Income-tax Rules, 2026 defines the first one in a single sentence. It is an allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office or employment of profit, where no free conveyance is provided by the employer. That last clause does real work, and it is the one most easily overlooked.

So a maintenance engineer at a manufacturing unit in Rajkot who drives to a customer plant is on the first line. The same engineer driving from home to the factory gate every morning is on the second. If the company runs a staff bus, that touches the second line and not the first, because a staff bus does not carry anybody to a customer plant.

Whole teams sit on the first line. A field sales team travels to do the job by definition, which is why their travel claims and their attendance record usually get discussed in the same meeting.

Petrol, Fuel and Flexi Allowances: Does the Name Matter?

This section answers the question that brings a lot of people to this page. Your payslip says fuel allowance, or petrol allowance, or the line sits inside a flexible benefit plan, and rule 280 does not work from any of those labels.

Rule 280 opens both of its lists with the same four words: by whatever name called. What your payroll software prints on the payslip does not decide how the money is taxed. Two things decide it:

1. What the money is for. If it meets travel done in performing the duties of the job, it is the conveyance allowance the rule describes, whatever the line happens to be called.
2. Whether the employer already provides the conveyance. A fuel card or a company vehicle for those same journeys is free conveyance, and the exemption goes with it.

One thing sits outside all of this. A car owned or leased by the employer and handed to an employee is not an allowance at all. It is a perquisite with its own valuation rules, which is why this post leaves it aside.

Where the Conveyance Allowance Rule Now Sits

This section is short, and it matters because most of what you will read online cites a law that no longer exists.

On 1 April 2026 the Income-tax Act, 2025 came into force, replacing the Income-tax Act, 1961 after six decades. The Income-tax Rules, 2026 were notified on 20 March 2026 to go with it. The phrase assessment year went with the old Act, and tax year took its place, so the year this post describes is tax year 2026-27.

Conveyance allowance now sits in two places:

1. The Act. Schedule III, read with section 11, keeps a special allowance out of total income to the extent to which such expenses are actually incurred for that purpose.
2. The Rules. Rule 280 lists which allowances qualify, and conveyance for duty travel is one of them.

The old references were section 10(14) and rule 2BB. If a page you are reading still quotes those for the current year, nobody has updated it since March.

Conveyance Allowance Exemption Limits, in One Table

Here is the whole answer in one table. The row most people arrive for is the first, and it is the one with no maximum at all.

Read the first row again, because it is the one people find hardest to believe. There is no maximum on conveyance allowance for duty travel. The limit is what the employee actually spent, which means the exemption is only ever as large as the evidence behind it.

Why the ₹1,600 Figure Refuses to Die

Almost every article on this topic still quotes ₹1,600 a month. It is worth knowing where the number came from, so you can recognise it when a consultant repeats it.

Until 2018 the rules did exempt a flat monthly transport allowance for the commute. The Finance Act 2018 removed it, and the memorandum to that year’s Finance Bill explained the trade in a single sentence: because a standard deduction was arriving in its place, the exemption for transport allowance, except in the case of differently abled persons, was proposed to be withdrawn.

The commute exemption went, and a flat deduction came in that needed no bills and no allowance line at all. Under section 19 of the Income-tax Act, 2025 that deduction now stands at ₹75,000 under the default regime in section 202(1), and ₹50,000 for anyone who opts out of it.

The old rule still shows the scar. Open rule 2BB of the superseded 1962 Rules and entry 10, where the commute exemption used to sit, now reads only [***]. The same rule kept one exception alive: an employee who was blind, deaf and dumb, or orthopaedically handicapped could still claim ₹3,200 a month against the commute. That exception survived, and this year it grew.

How Payroll Calculates the Conveyance Allowance Exemption

This section shows the working. Four steps, then three examples from different kinds of business.

1. Split the line. Decide how much of the allowance is for duty travel and how much is for the commute. They follow different rules.
2. Check the free conveyance test. If the company provides a vehicle, a cab or a fuel card for that travel, the duty portion is not exempt.
3. Take the lower of two numbers. The exempt amount is the allowance paid or the amount actually spent, whichever is less.
4. Tax the rest. Anything paid above what was spent is salary.

1. A diagnostic lab chain in Pune

A phlebotomist collects home samples across the city and is paid ₹4,200 a month as conveyance allowance. Fuel and parking receipts for the month come to ₹3,650. The exempt amount is ₹3,650, because that is the lower figure. The remaining ₹550 is taxable salary. A diagnostic lab that collects receipts monthly rather than at year end never has to reconstruct this in March.

2. An IT services firm in Hyderabad

A developer is paid ₹2,000 a month described as conveyance allowance, and works from the office five days a week with no client visits at all. Nothing is spent in the performance of duties, so nothing is exempt. The full ₹2,000 × 12 = ₹24,000 for the year is taxable. The line is a naming habit, not an exemption.

3. A supermarket chain in Indore

An area manager visits six stores a week and is paid ₹6,000 a month, but the company also gives them a fuel card for those visits. Free conveyance is provided, so the exemption under rule 280 does not apply, and the allowance is taxable in full even though the travel is genuine.

Three businesses, three answers, and the allowance line looks identical on all three payslips. This is why the reconciliation has to happen where you build the salary structure, rather than at the end of the year.

The decisions here are not really tax decisions. They are HR and payroll ones, because the choice sits in the CTC structure and in what the payroll team collects each month. Conveyance has to be evidenced rather than assumed, in the same way salary advances and arrears are.

Attendo (formerly Petpooja Payroll) is a complete workforce management system that runs everything from attendance at the door through to salary, statutory deductions and payslips in one place. Where the salary structure and the attendance to salary workflow sit in the same system, an allowance line that has stopped being exempt is visible when it changes, not in January when declarations come in.

Transport Allowance Changes for Employees With a Disability

This is the biggest change in rule 280. The money moved, and so did the question of who qualifies. The wording used throughout this section is the rule’s own: blind or deaf and dumb or orthopaedically handicapped.

The ₹3,200 a month that survived 2018 is now gone too. Rule 280 of the Income-tax Rules, 2026 replaces it with ₹15,000 plus dearness allowance thereon per month in metro cities and ₹8,000 plus dearness allowance thereon in other cities. The word thereon is doing real work there. The dearness allowance is worked out on the ₹15,000 or ₹8,000 itself, not on the employee’s salary, so the exempt figure is not flat and moves as the applicable rate moves.

The change to who qualifies is quieter and matters more. The old rule covered orthopaedic disability of lower extremities. Rule 280 covers disability of lower or upper extremities. Employees who were outside the old wording are inside the new one.

One thing the entry does not do is say which cities are metro cities. It sets a higher figure for them without defining the term. Rule 279 lists Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru, but it lists them for house rent allowance, which is a different provision. Treat the two lists as separate until the department says otherwise, and take advice before applying the higher figure outside the four traditional metros.

What Payroll Should Fix in the Conveyance Allowance Line

Five things follow from all of the above, and none of them needs anything from the tax department.

1. Give the line a purpose. A fixed monthly amount paid to everybody regardless of whether they travel is taxable salary with a misleading label, and an assessing officer will read it that way.
2. Keep the evidence. The exemption is measured by what was spent, which means receipts, a log, or a claim your system can produce later. This is what the investment declaration process is for, and conveyance belongs in it alongside everything else the employee is claiming.
3. List everyone who already gets free conveyance. Anybody with a company vehicle, cab facility or fuel card should not also be drawing an exempt conveyance allowance for the same travel.
4. Move anyone on the disability entry to the new figure. The old ₹3,200 a month no longer applies, and the qualifying wording is wider than it was.
5. Search your handbook and offer letter templates for 1,600. Delete what you find.

The last one takes ten minutes and is the one most likely to still be wrong. Salary templates outlive the rules they were written against, and this particular figure has been obsolete since 2018.

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