The government has allowed individuals under the new lower tax regime to claim an I-T exemption on conveyance allowance received from employers.

The Central Board of Direct Taxes (CBDT) has now amended Income Tax rules to prescribe certain exemptions which can be availed by the employees.

Individuals will also be able to claim income tax exemption for conveyance, travel and other allowances given by employers under the new regime that offers lower tax rates, according to a notification issued by the Central Board of Direct Taxes (CBDT) on Saturday.

The apex direct taxes body has notified new rules to enable individuals to claim exemptions for allowance to meet the cost of travel, daily expenses on transfer, tour allowance for travel for official purposes to meet the travel and daily expenses, and conveyance allowance for meeting conveyance expenditure incurred in course of performing official duties.

Persons with disabilities – blind, deaf, and dumb or orthopedically handicapped employees – can also claim ad hoc exemption of transport allowance of Rs 3,200 per month while computing salaried income. The latest rule prescribes providing transport in such cases as a responsibility of the employer, and hence the tax exemption.

However, the benefit of tax exemption for free meals or non-alcoholic beverages or meal vouchers up to Rs 50 per meal during office hours will not be available to employees opting for the new scheme.

“The notification has rightly exempted allowances in the nature of tour, transfer or conveyance for official purposes, since these are essentially incurred by employees not for their personal benefit, but for discharging their official duties, and therefore expecting employees to pay tax on such amount even under the new scheme would have been unreasonable,” said Shailesh Kumar, partner, Nangia & Co LLP.

Offering an optional lower rate of income tax to individuals, Finance Minister Nirmala Sitharaman in her Budget for 2020-21 proposed a new optional tax regime under section 115BAC of the I-T Act for individuals willing to forego certain specified deductions or exemptions while computing total income for tax purpose.

Under this, annual income up to Rs 2.5 lakh is exempt from tax. Those individuals earning between Rs 2.5 lakh and Rs 5 lakh will pay a 5 percent tax. Income between Rs 5 and 7.5 lakh will be taxed at 10 percent, while those between Rs 7.5 and 10 lakh at 15 percent.
Those earning between Rs 10 and 12.5 lakh will pay tax at the rate of 20 percent, while those between Rs 12.5 and Rs 15 lakh will pay at the rate of 25 percent. Income above Rs 15 lakh will be taxed at 30 percent.
The new I-T slabs would be for individuals not availing certain specified deductions or exemptions.