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Monday, June 8, 1998

Transport allowance up to Rs 800 exempt from IT 

B S Jindal & Akhil Jindal  
The fifth pay commission had recommended transport allowance to the officers and employees on account of journey from home to office and back.

Accordingly the government has accepted the same, but it was earlier clarified that this allowance will be subject to income tax.

The employees were not pleased as this resulted in giving from one hand and taking it back from other hand. Now the CBDT has issued notification clarifying that the transport allowance up to Rs 800 will not be taxable at all in all cases of employees. This has resulted in relief to the employees and additional cash surplus.

The Central government has, on the recommendation of the fifth pay commission, given to officers and employees of the Central government, with effect from the August 1st, 1997, a transport allowance of an amount not exceeding Rs 800 per month in accordance with their entitlement.

The officers of the rank of Joint Secretary and above in the Central government are entitled for official vehicles for the purposes oftheir journey from home to office and back in lieu of the transport allowance, which is not treated as a perquisite and is not taxed under the Income Tax Act of 1961.

The transport allowance given to:

  • The officers of the rank of Joint Secretary and above who opt for transport allowance in lieu of the said facility of availing of official vehicle and,
  • All other officers and employees including group C and D officials for the same purpose is liable to income tax.

    To remove the above anomaly and treat all the persons equally in the matter of taxation of transport allowance, the Central Board of Direct Taxes has decided to exempt with retrospective effect, that is with effect from the August 1st, 1997, the transport allowance equal to an amount not exceeding Rs 800 per month drawn by any officer or employee working under the Central government or state government or and establishment other than Central government or state governments under the Income Tax Act 1961.

    Therefore, the rule 2bb ofthe income tax rules 1962 was amended with effect from the August 1st, 1997. The retrospective effect shall not prejudicially affect the interest of employees. The notification is reproduced for the benefit of all.

    Notification No 10586 (F No 142/18/98-TPL) Dated 13.4.98:
    In exercise of the powers conferred by section 295 of the Income Tax Act 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income Tax Rules 1962 namely

  • These rules may be called the Income Tax Seventh Amendment rules 1998.
  • They shall be deemed to have come into force on the day 1 of August, 1997.

    In the Income Tax Rules 1962 in Rule 2bh in sub rule 2 in table after serial number 9 the following serial number and entries, thereto shall be inserted namely, serial number and allowances.

    Transport allowance granted to an employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty.

    Name of allowance:transport allowance. Place at which allowance is exempt: Whole of India . Extent to which exempt: Rs 800 per monthThereforth all the employees should claim the transport allowance received as exempt from the income tax.

    The Jindals are Delhi-based chartered accountants

    Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.


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