I was struggling for a long time to know how is travel allowance calculated. So, after studying deeply and doing so much research I’ve found the simplest way to calculate the travel allowance.
One of the most well-liked benefits that a company may provide to its staff all over the world – Is a travel Allowance!!! The majority of private and public companies offer this allowance each year. This grant is sometimes known as a “transport allowance.”
In general, the term “travel allowance” refers to employee payments to cover transportation-related costs.
According to Section 10(14) of the Income Tax Act, 1961, Travel allowance can be: Either, when employees are given reimbursement for their travel costs between their place of residence and their place of employment.
Or, allowance to workers in the transportation industry for the personal expenses incurred while on the job, managing transportation from one location to another.
Now after knowing the meaning, you might be curious how it is calculated.
So here is How the Transport Allowance is factored into the Basic Salary?
To be Noted
According to Section 10(14) of the Income Tax Act, of 1961
• This allowance has no limit, although the Rs1600 monthly cap, or the travel allowance element on your wage statement, isn’t taxable.
•Any sum in excess of the Rs 1600 transportation allowance is also subject to income tax under the salary tax code. A salaried employee is qualified for this exemption.
• For instance, if your company pays you Rs. 2000 in transportation expenses each month, your tax status would be
- Amount Received for Travel Allowance= @rs. 3000 per month
- Subtract the amount of the legal tax exemption = @rs. 1600 per month
- Exemption from Taxable Amount= @rs. 1400 per month.
As per the Income Tax Act, of 1961
The allowance becomes a tax deduction once you go beyond a certain amount.
The current allowance for transport is ₹1,600 per month.
And thus, for salaried handicapped persons, the exemption is ₹3,200 per month.
Also as of July 1st, 2017, the calculation of the transport allowance on the basic salary will be done in accordance with the 7th pay commission’s recommendations.
The formula for calculation of Travel Allowance :
So, here is the formula to calculate travel allowance:
Travel Allowance = A + [(A x D)/100]
• Transport Allowance Rate = A
• % of the current dearness allowance =D
i.e
Travel allowance = Transport Allowance Rate + [(Transport Allowance Rate * %of the current dearness allowance)/100].
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