If you are a salaried employee with a disability, your salary slip may include a transport or conveyance allowance. One important question is whether the conveyance allowance under the new tax regime still qualifies for a tax exemption for employees with specified disabilities, or whether the benefit has been removed along with many other salary exemptions.
The good news is that this particular benefit has not disappeared. Eligible employees with specified disabilities can still claim an exemption for transport allowance used for commuting between their residence and place of duty, subject to the prescribed conditions. The exemption is currently limited to Rs 3,200 per month, or Rs 38,400 per year.
In this guide, we explain exactly how conveyance and transport allowances are treated under the new tax regime, who can claim the disability-related exemption, what the applicable limit is, and what you need to check in your salary structure and Form 16. This can help you avoid paying more tax than necessary while staying compliant with the rules.
What Is Conveyance Allowance and Who Gets It?
Conveyance allowance is a salary component provided by an employer to meet certain transportation-related expenses. However, it is important to distinguish between transport allowance for commuting between home and the workplace and allowances or reimbursements provided for travel performed as part of official duties.
Under the current tax rules, a transport allowance of up to Rs. 3,200 per month, or Rs. 38,400 per year, can be exempt for an employee with a specified disability when it is provided for commuting between the employee’s residence and place of duty. This benefit is available subject to the applicable conditions under Section 10(14) read with Rule 2BB of the Income Tax Rules.
The earlier general transport allowance exemption available to employees was effectively replaced by the standard deduction for salaried taxpayers. However, the higher transport allowance exemption for eligible employees with specified disabilities continues to be available, including under the new tax regime.
Who Qualifies as an Employee with a Specified Disability?
The disability-related transport allowance benefit applies to employees with specified disabilities covered under the applicable provisions of the law. These may include conditions such as:
- Blindness or low vision
- Hearing impairment
- Locomotor disability
- Cerebral palsy
- Autism spectrum disorder
- Intellectual disability
- Mental illness
- Multiple disabilities
The employee must meet the prescribed eligibility requirements and possess the appropriate disability certificate issued by the competent medical authority. The applicable disability criteria and documentation requirements should be verified before claiming the exemption.
The key point is simple: the Rs. 3,200 per month transport allowance exemption for eligible employees with specified disabilities is not the same as the old general conveyance allowance exemption. Therefore, employees should check their eligibility and salary structure carefully rather than assuming that all conveyance-related allowances are either fully taxable or fully exempt under the new regime.
The New Tax Regime: How It Changes Everything
The new tax regime, introduced in Budget 2020 and made the default regime from FY 2023-24 onwards, offers lower tax rates in exchange for giving up many of the exemptions and deductions available under the old regime. This is the key trade-off that salaried employees need to understand before choosing a tax regime.
Several common salary exemptions are not available under the new regime, including exemptions for HRA and LTA. However, it is incorrect to assume that every allowance under Section 10(14) becomes taxable under the new regime.
What Happens to Transport Allowance for Employees with Specified Disabilities?
This is an important exception. An employee with a specified disability can continue to claim an exemption for transport allowance provided for commuting between the employee’s residence and place of duty, subject to the applicable conditions.
The exemption is available up to Rs. 3,200 per month, or Rs. 38,400 per year.
Therefore, if an eligible employee receives Rs. 3,200 per month as a qualifying transport allowance, the amount can remain exempt even when the employee opts for the new tax regime, provided the prescribed conditions are satisfied.
For example, if an eligible employee receives Rs. 3,000 per month as a qualifying transport allowance, the annual amount of Rs. 36,000 can potentially be exempt. If the employer pays Rs. 4,000 per month, the exemption is restricted to the prescribed limit of Rs. 3,200 per month, and the excess amount is taxable.
The Important Distinction
Do not confuse the disability-related transport allowance exemption with the old general conveyance allowance exemption.
The general transport allowance exemption that was historically available to ordinary employees is no longer a separate tax-saving benefit in the same way. However, the specific exemption available to employees with specified disabilities continues, subject to the applicable rules.
So, the statement that “all conveyance or transport allowance becomes taxable under the new regime” is incorrect. Eligible employees with specified disabilities should check their salary structure, disability documentation, and the nature of the allowance before assuming that the entire amount is taxable.
Conveyance Allowance New Tax Regime vs Old Regime: A Clear Comparison
To understand the difference clearly, it is important to distinguish the general conveyance allowance from the specific transport allowance exemption available to employees with specified disabilities.
| Feature | Old Tax Regime | New Tax Regime |
|---|---|---|
| Transport allowance for eligible employees with specified disabilities | Exempt up to Rs. 3,200 per month | Exempt up to Rs. 3,200 per month, subject to conditions |
| Maximum annual exemption | Rs. 38,400 | Rs. 38,400 |
| Standard deduction for salaried employees | Rs. 50,000 | Rs. 75,000 |
| Relevant provision | Section 10(14) read with Rule 2BB | Section 10(14) read with Rule 2BB, subject to new regime conditions |
| Disability documentation | Required where applicable | Required where applicable |
| General transport/conveyance allowance for ordinary employees | Generally not separately exempt | Generally not separately exempt |
| Other popular deductions | More deductions and exemptions available | Most common deductions and exemptions not available |
| Overall tax impact | Depends on eligible deductions and exemptions | Often beneficial for taxpayers with fewer deductions |
The new tax regime does not automatically make the disability-related transport allowance taxable. An eligible employee with a specified disability can continue to claim the exemption of up to Rs. 3,200 per month, subject to the prescribed conditions.
The bigger difference between the two regimes comes from the treatment of other deductions and exemptions. Under the old regime, an eligible taxpayer may be able to claim benefits such as Section 80C, Section 80D, HRA and certain other deductions. Under the new regime, most of these benefits are not available.
Therefore, a disabled salaried employee should not choose between the two regimes based on conveyance or transport allowance alone. The correct approach is to compare the total tax liability under both regimes, taking into account the standard deduction, eligible disability-related benefits, other deductions, salary structure and income level.
5 Must-Know Facts About Conveyance Allowance and the New Tax Regime
These are five important facts that employees with specified disabilities should understand before choosing or continuing with a tax regime.
Fact 1: The Disability-Related Transport Allowance Exemption Can Continue Under the New Regime
The exemption does not automatically disappear when you choose the new tax regime. An eligible employee with a specified disability can claim an exemption for transport allowance provided for commuting between their residence and place of duty, subject to the prescribed conditions.
The exemption is available up to Rs. 3,200 per month, or Rs. 38,400 per year.
However, this should not be confused with the general transport or conveyance allowance that was historically available to ordinary employees.
Fact 2: The New Regime Is Now the Default
From FY 2023-24, the new tax regime became the default regime for individual taxpayers. For salaried employees, the employer generally calculates TDS based on the regime declared by the employee. If no valid choice of the old regime is communicated for TDS purposes, the employer generally calculates TDS under the default new regime.
However, the TDS calculation by your employer does not necessarily determine your final tax liability. Eligible salaried taxpayers without business or professional income can generally choose the appropriate regime when filing their Income Tax Return.
Fact 3: Salaried Employees Without Business Income Can Reassess Their Choice Each Year
If you are a salaried individual without income from business or profession, you can generally choose between the old and new tax regimes each year when filing your Income Tax Return.
The regime selected for TDS by your employer is primarily relevant to the amount of tax deducted during the year. If your final tax calculation shows that the other regime is more beneficial, you can generally make the appropriate choice while filing your ITR.
Taxpayers with business or professional income are subject to different rules regarding switching between regimes, so they should check the applicable provisions before making a change.
Fact 4: Section 80U Deduction Is Not Available Under the New Regime
Eligible taxpayers with a specified disability may claim a deduction under Section 80U under the old tax regime. The deduction is generally Rs. 75,000 for a person with a disability and Rs. 1,25,000 for a person with a severe disability, subject to the prescribed conditions and documentation.
This deduction is not available under the new tax regime.
Therefore, an eligible taxpayer should consider the loss of the Section 80U deduction when comparing the two regimes. The tax impact may be considerably larger than the difference arising from the transport allowance alone.
Fact 5: A Complete Tax Comparison Is Better Than Focusing on One Benefit
The decision between the old and new tax regimes should not be based solely on conveyance or transport allowance.
Compare your total tax liability after considering all relevant factors, including:
- Standard deduction
- Disability-related transport allowance exemption
- Section 80U eligibility
- Section 80C investments
- Health insurance deductions, where applicable
- HRA exemption, where applicable
- Home loan interest, where applicable
- Employer NPS contribution under Section 80CCD(2)
- Your total taxable income and applicable tax rates
The regime that results in the lower overall tax liability is generally the more beneficial option for your circumstances.
For employees with specified disabilities, the right comparison is therefore not simply “conveyance allowance under old regime vs new regime.” It is a comparison of the complete tax benefits available under each regime.
A Practical Example: Rajan’s Tax Calculation in 2025
Consider Rajan, a 38-year-old salaried employee in Pune with a locomotor disability. His annual gross salary is Rs. 8,00,000. His employer provides a qualifying transport allowance of Rs. 3,200 per month, or Rs. 38,400 per year. Rajan has a valid disability certificate confirming a 60% disability and is eligible for the deduction under Section 80U. He also makes Rs. 1,50,000 of eligible investments under Section 80C.
Let us compare the two tax regimes using simplified figures for illustration.
| Component | Old Tax Regime (Rs.) | New Tax Regime (Rs.) |
|---|---|---|
| Gross Salary | 8,00,000 | 8,00,000 |
| Less: Standard Deduction | 50,000 | 75,000 |
| Less: Qualifying Transport Allowance Exemption | 38,400 | 38,400 |
| Less: Section 80C | 1,50,000 | Not available |
| Less: Section 80U | 75,000 | Not available |
| Approx. Taxable Income | 4,86,600 | 6,86,600 |
Under the old regime, Rajan benefits from the standard deduction, the qualifying transport allowance exemption, Section 80C and Section 80U. Under the new regime, the standard deduction and the eligible disability-related transport allowance exemption remain available, but Section 80C and Section 80U deductions are not available.
At this income level, Rajan should not decide purely by looking at the taxable-income difference. The applicable Section 87A rebate and the tax calculation under each regime must also be considered. For FY 2025-26, the new regime provides a rebate for eligible taxpayers with taxable income within the prescribed limit, which can significantly affect the final tax payable.
The key lesson is that a disabled salaried employee should compare the complete tax position, rather than assuming that the new regime automatically removes every disability-related benefit.
What Should a Disabled Employee Do Right Now?
If you are a salaried employee with a specified disability, here are some practical steps to take before the end of the financial year:
- Keep your disability certificate ready and make sure it has been issued by the appropriate medical authority and meets the applicable requirements.
- List all deductions and exemptions you may be eligible for under the old regime, such as Section 80C, Section 80D, Section 80DD, Section 80U, HRA, LTA and other applicable benefits.
- Check your transport allowance separately. If you are eligible for the disability-related transport allowance exemption, verify that your employer has correctly structured and reported the allowance. The exemption can be available up to Rs. 3,200 per month, subject to the prescribed conditions.
- Calculate your tax liability under both regimes using your actual income, deductions and exemptions. Do not choose a regime based on a general rule or a colleague’s experience.
- Inform your employer of your preferred tax regime for TDS purposes at the beginning of the financial year or within the employer’s prescribed declaration period. This helps ensure that the appropriate amount of tax is deducted from your salary.
- Verify your Form 16 at the end of the financial year. Check your salary income, standard deduction, eligible exemptions, and other relevant details before filing your ITR.
- Reassess your choice when filing your ITR. For salaried individuals without business or professional income, the regime used by the employer for TDS does not necessarily determine the final regime choice for the tax return. You can generally choose the regime that results in the lower final tax liability, subject to the applicable rules.
Most importantly, do not assume that the new regime is automatically better or worse for an employee with a disability. The new regime provides a higher standard deduction and retains certain benefits, including the prescribed transport allowance exemption for eligible employees with specified disabilities. At the same time, deductions such as Section 80C and Section 80U are not available under the new regime.
The right decision therefore depends on your complete tax position, including your income, disability-related benefits, eligible deductions, salary structure and applicable tax rates. A side-by-side calculation using your actual numbers is the most reliable way to decide.
How Tax Planning Connects to Your Investment Strategy
Tax planning and investing are closely connected. The tax regime you choose can affect how much disposable income you retain, which can influence how much you can invest toward your financial goals.
For example, suppose Rajan’s tax planning results in an annual tax saving of Rs. 12,000. If his cash flow allows, he could redirect that saving toward a monthly SIP of Rs. 1,000. Over ten years, regular investing can build a meaningful corpus, although the actual value will depend on the investment selected, market conditions, investment duration, and returns.
The important point is that tax planning should not end with reducing your tax liability. If you can save money through legitimate tax planning, consider giving that surplus a purpose by directing it toward goals such as retirement, children’s education, or other long-term financial objectives.
However, choosing a mutual fund should not be based on tax savings alone. Your investment choice should consider your financial goals, investment horizon, income stability, risk tolerance, and overall financial situation. A fund that may be suitable for Rajan may not necessarily be suitable for another investor with a similar income level.
Final Words: Do Not Let the Default Decision Cost You
The question of conveyance allowance under the new tax regime needs to be understood carefully. The disability-related transport allowance exemption does not automatically disappear when an eligible employee chooses the new regime. An employee with a specified disability can continue to claim the prescribed exemption of up to Rs. 3,200 per month, or Rs. 38,400 per year, for qualifying transport allowance, subject to the applicable conditions.
However, the choice between the old and new tax regimes involves much more than conveyance or transport allowance. Under the old regime, eligible taxpayers may claim deductions such as Section 80C and Section 80U, subject to the applicable conditions. These deductions are generally not available under the new regime. At the same time, the new regime offers lower slab rates and a higher standard deduction, along with certain other benefits that remain available.
For an employee with a specified disability, the right regime therefore depends on the complete tax calculation, not on a single allowance or deduction. The old regime may be more beneficial for someone with substantial eligible deductions, while the new regime may work better for someone with fewer deductions and a lower overall tax burden under the revised slab structure.
The smartest approach is simple: calculate your tax liability under both regimes using your actual income, salary structure, disability-related benefits and eligible deductions. Do not assume that the default regime is automatically the best option for you.
Frequently Asked Questions
Is conveyance allowance exempt for disabled employees under the new tax regime?
No. The exemption under Section 10(14) read with Rule 2BB for transport or conveyance allowance granted to an employee with a disability is not available under the new tax regime. Therefore, if you opt for the new regime, the allowance received from your employer is generally taxable as part of your salary.
Under the old tax regime, the exemption can be claimed up to Rs. 3,200 per month, subject to the prescribed conditions.
What is the conveyance allowance exemption limit for disabled employees under the old regime?
Under the old tax regime, an employee with a specified disability can claim an exemption of up to Rs. 3,200 per month, or Rs. 38,400 per year, for the eligible transport allowance. The exemption is subject to the conditions prescribed under the Income Tax Rules, and the employee should have the required disability documentation.
Can I switch back to the old tax regime to claim the conveyance allowance exemption?
Yes, if you are a salaried individual without income from business or profession, you can choose between the old and new tax regimes each year while filing your Income Tax Return. Your choice for TDS purposes can be communicated to your employer during the financial year, but the employer’s TDS treatment does not permanently lock you into that regime.
If the regime used for TDS differs from the regime you ultimately choose while filing your ITR, the final tax liability can be calculated accordingly, and any excess TDS may be refunded.
Is the Section 80U deduction available under the new tax regime?
No. The deduction under Section 80U for an individual with a disability is not available under the new tax regime. Under the old regime, an eligible individual can claim a fixed deduction of Rs. 75,000 for a disability of 40% or more and Rs. 1,25,000 for a severe disability of 80% or more, subject to the applicable conditions.
This can be an important factor for a disabled taxpayer when comparing the two regimes.
How do I decide which tax regime is better for me as a disabled employee?
The right choice depends on your complete tax position, not on conveyance allowance alone. Under the old regime, consider benefits such as the eligible transport allowance exemption, Section 80U, Section 80C, HRA, and other deductions that apply to your situation. Then compare the resulting tax liability with the new regime, where most deductions and exemptions are not available, but the slab structure is more favourable.
For FY 2025-26, the new regime also provides a Section 87A rebate for eligible taxpayers with taxable income up to Rs. 12 lakh, subject to the applicable conditions. Salaried taxpayers can also claim the Rs. 75,000 standard deduction under the new regime.
The best approach is to calculate your tax under both regimes using your actual salary, allowances, deductions, and other income. The regime that results in the lower overall tax liability is generally the more suitable choice for that financial year.
Disclaimer
The information provided in this blog is for educational and informational purposes only and should not be construed as investment advice. Please consult a qualified financial advisor before making any investment decisions. Shashikant Chanderkumar Mudaliar (ARN: 319377), operating under the brand name VSJ FinMart, is an AMFI-registered Mutual Fund Distributor (MFD) and does not provide investment advisory services. Mutual fund investments are subject to market risks. Past performance is not indicative of future results. Please read all scheme-related documents carefully before investing. Registration details can be verified at www.amfiindia.com/locate-distributor.