Transport Allowance in India is fully taxable for most salaried employees as of 2026 — the old ₹1,600/month tax-free limit was abolished in 2018 and replaced by the standard deduction, which now stands at ₹75,000/year under the New Tax Regime. The one major exception is specially-abled employees (blind, deaf, or orthopedically handicapped), who can still claim an exemption of ₹3,200 per month, or ₹38,400 per year.
Why Most Employees Get No Transport Allowance Exemption Anymore
Every month, lakhs of employees see a "Transport Allowance" line item on their payslip and assume it's tax-free, because that was true before 2018. Since the 2018 Budget:
- The ₹1,600/month Transport Allowance exemption was withdrawn
- It was replaced by a flat Standard Deduction, now ₹75,000/year under the New Regime (₹50,000 under the Old Regime) for FY 2025-26 / FY 2026-27
- Transport Allowance itself is now fully taxable and simply added to gross salary like any other allowance
Union Budget 2026-27 made no changes to this — the framework carries forward unchanged.
Exception: Transport Allowance for Disabled Employees
Employees who are blind, deaf, or orthopedically handicapped can still claim a transport allowance exemption under Section 10(14):
| Period | Exemption Limit |
|---|---|
| Monthly | ₹3,200 |
| Annual | ₹38,400 |
This applies under both the Old and New Tax Regimes and remains unchanged for AY 2026-27, as amended by the Finance Act 2026.
Transport Allowance vs Conveyance Allowance — Don't Confuse the Two
These two terms get mixed up constantly, but they're taxed differently:
| Aspect | Transport Allowance | Conveyance Allowance |
|---|---|---|
| Purpose | Home-to-office daily commute | Travel during official duty (client visits, site work) |
| Taxability | Fully taxable (except disabled employees) | Exempt up to actual expenses incurred, under Section 10(14)(ii) |
| Proof required | None | Yes, actual expense proof needed for exemption |
| Applies to | All salaried employees | Employees who travel for work-related duties |
If your payslip shows "conveyance allowance" for on-duty travel with expense proof, that portion can still be exempt to the extent of actual expenses — this is different from a flat home-to-office commute allowance.
Central Government Employees: A Different Structure
Central government employees receive Transport Allowance (TPTA) calculated differently, based on pay level and posting location, distinct from the fully-taxable private-sector version. Employees using other modes of transport for official duty may also receive distance-based allowances (varying by kilometers travelled), separate from regular TA.
Is There a Proposal to Increase the Exemption?
There has been public discussion around potentially raising the disabled-employee exemption from ₹3,200/month to as much as ₹15,000/month in metro cities and ₹8,000/month in non-metro cities. As of this writing, this remains a proposal under discussion — not an enacted change. Always verify against the latest CBDT notification before relying on any higher figure for payroll or tax filing.
Quick Reference
Regular employees: Transport Allowance = fully taxable (folded into Standard Deduction)
Disabled employees: ₹3,200/month or ₹38,400/year exempt under Section 10(14)
Conveyance Allowance (official duty travel): exempt up to actual expenses, with proofSee also: our Fuel Reimbursement guide and Salary Slip Format guide for how other allowances are taxed.
Getting allowance taxability wrong on payslips leads to compliance headaches down the line. Reach out to our team at info@meagle360.com or WhatsApp us, or book a 15-minute demo to see the correct tax treatment applied to every allowance automatically.
