The Finance Ministry has raised the tax exemption ceiling on the allowance paid to Operational level employees of transport systems including railways and domestic airlines for meeting their personal expenses during the duty performed in running the transport system from one place to another in India.

The tax exemption ceiling on such allowances has been hiked to Rs 10,000 a month from an earlier ceiling level of Rs 6,000 a month. The exemption is available only if such an employee is not in receipt of any daily allowance.

The revision in tax exemption ceiling has been made on a retrospective basis from September 1, 2008. This has been done through an amendment in the income tax rules, official sources said.

Prior to this revision, employees were allowed tax exemption of 70 per cent of such allowance up to a maximum of Rs 6,000 a month. This upper limit of Rs 6,000 a month was effective from August 1997.

The latest CBDT move (notification) increases the tax exemption available to pilots, air hostesses or similar personnel in respect of the allowance granted to them by the employer for meeting the personal expenses incurred while they are on duty in domestic travel.

Exemption Limit in respect of Above Allowance:-

From 01.09.2008- Any Allowance granted to an employeeworking in any transport system for meeting his personal expenditure during his duty performed in the course of running of such transport from one place to another place, provided that such employee is not in receipt of daily allowance – up to 70% of allowance, maximum of Rs. 10,000 p.m.

Up to 31.08.2008 – Any Allowance granted to an employeeworking in any transport system for meeting his personal expenditure during his duty performed in the course of running of such transport from one place to another place, provided that such employee is not in receipt of daily allowance – up to 70% of allowance, maximum of Rs. 6,000 p.m.

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