The government under the new lower tax regime has allowed individuals to claim 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.
Under the new exemption the cost of travel on tour or on transfer, any allowance, whether, granted on tour or for the period of journey in connection with the transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
It also includes an exemption for any allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office or employment of profit, provided that free conveyance is not provided by the employer.
The CBDT has further clarified that while determining the value of perquisites, no exemption will be available in respect of free food and non-alcoholic beverage provided by employers through a paid vouchers.
Further, blind, deaf and dumb or orthopedically handicap employees can also claim ad-hoc exemption of transport allowance of Rs 3,200 per month while computing salaried income.
Offering an optional lower rate of income tax to individuals, Finance Minister Nirmala Sitharaman in her Budget for 2020-21 proposed the new optional tax regime under section 115BAC of 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 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 be taxed at the rate of 20 percent, and those between Rs 12.5 and Rs 15 lakh, at 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.
The notification considers free meals/ beverages provided by an employer to employees during office hours to be a personal benefit to employees and not an expenditure for official purposes. Therefore, similar to other allowances withdrawn under new scheme/ slabs, tax exemption of such free meals/ beverages has been withdrawn under the new scheme, Kumar added.
