Transport Allowance Tax Rules: Which Salaried Employees Can Still Get This Tax Benefit

For many salaried employees, transport allowance no longer plays any meaningful role during tax filing season. After the standard deduction system came into effect, several smaller exemptions gradually disappeared from salary structures. Yet, one category of employees continues to receive tax relief on transport allowance even today.

Now, this relief is expected to become far more substantial under the revised income tax framework proposed for FY2026-27. The proposed revision is expected to matter more for disabled employees because everyday travel often becomes far more expensive for them, particularly in cities where accessible public transport options remain limited.

The revision comes at a time when the government is slowly restructuring salary-related tax provisions ahead of the implementation of the Income Tax Act, 2025, according to a recent Livemint report.

Who Is Still Eligible For This Exemption

At present, transport allowance exemption is not available to most salaried taxpayers. Earlier, employees could claim a limited exemption on commuting-related allowance, but that changed after the standard deduction replaced multiple small tax breaks.

However, the exemption has continued for specific categories of disabled employees.

This includes employees who are blind, deaf, and mute, or individuals with orthopaedic disabilities involving the lower or upper limbs. Under the present rules applicable for FY2025-26, eligible employees can claim a tax exemption of up to Rs 3,200 per month against the transport allowance received from employers.

For many employees, this adjustment is already reflected in salary calculations made by the employer while deducting TDS. But tax experts say employees should still review Form 16 carefully because there are instances where allowance-related exemptions are either missed or incorrectly classified.

In such cases, taxpayers may still claim the exemption while filing their ITR.

Professionals working with disability rights groups say transportation expenses often become an overlooked financial burden for disabled employees. In several cities, ordinary public transport infrastructure still remains inaccessible, forcing many individuals to depend on private arrangements or assisted mobility services for daily office travel.

Proposed Revision Could Raise Tax-Free Amount Significantly

The revised framework proposed under the upcoming tax system substantially increases the exemption threshold.

According to the revised provisions expected to apply from FY2026-27, eligible employees residing in metro cities may be able to claim exemption of up to Rs 15,000 per month together with dearness allowance components. For non-metro cities, the proposed exemption limit is Rs 8,000 per month along with dearness allowance.

If implemented, the revised limit would be substantially higher than the exemption available under the present system.

For some eligible employees living in metro cities, the total tax-exempt portion linked to transport allowance and dearness allowance could rise close to Rs 1.80 lakh a year, depending on how the salary package is structured.

According to tax professionals, the revision appears to take into account how sharply commuting expenses have increased in recent years. Apart from inflation, factors such as urban traffic congestion, rising fuel prices, and accessibility-related transportation requirements have made everyday travel far more expensive for many disabled employees.

What Employees Should Verify During Tax Filing

Experts say employees should not assume that the exemption has automatically been considered correctly in salary documents.

Before filing ITR, salaried taxpayers eligible for this relief should examine salary slips, allowance details, and Form 16 entries carefully. If the exemption has not been properly adjusted by the employer, the taxpayer may still claim it directly while filing the return.

Employees are also advised to keep disability certificates and supporting records available in case tax authorities later seek clarification regarding the exemption claim.

Apart from transport allowance, certain official-duty-related conveyance reimbursements and specific allowances available to employees working in transport-related sectors may also continue to receive tax relief under prescribed income tax provisions.

FAQs

Who can still claim transport allowance tax exemption?

The exemption is currently available only to certain disabled employees, including individuals who are blind, deaf and mute, or those with orthopaedic disabilities affecting limbs.

How much transport allowance exemption is proposed under the new tax framework?

Under the proposed FY2026-27 framework, eligible employees in metro cities may claim up to Rs 15,000 per month along with dearness allowance components, while non-metro employees may claim up to Rs 8,000 per month.

What should employees check before filing their ITR?

Eligible employees should verify Form 16, salary slips, and allowance entries carefully to ensure the exemption has been correctly adjusted. They should also keep disability certificates and supporting documents ready.