Perquisites & Allowances to Taxpayer opting Lower Tax Rate Option- Section 115BAC

CBDT issued Notification No. 38/2020-Income Tax Dated- 26/06/2020 amending rule 2BB  of Income Tax Rules to allow taxpayers who are opting for the new tax regime (section 115BAC)  to claim exemption for allowance to meet cost of travel and 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.

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.

Notification No. 38/2020-Income Tax provides that a Salaried Employee who opts for new Concessional Tax Regime can claim following Exempt Allowances as under under Section 10(14) of Income Tax Act, 1961:

1. Tour/Transfer Allowance

2. Daily Allowance when on Travel

3. Conveyance Allowance for Duties

4. Transport Allowance for Handicapped

Notification denies benefit of exemption to those who opted for new tax Regime in respect of free food and non­alcoholic beverage which was earlier available  even if value  not exceed fifty rupees per meal or to tea or snacks provided during working hour.

A. Amendment in Rules related to allowances for the purposes of clause (14) of section 10 for those who opted Lower Tax Rate Option- Section 115BAC

An employee, being an assessee, who has exercised Lower Income Tax Rate option under sub-section (5) of section 115BAC shall be entitled to exemption only in respect of the allowances mentioned in sub-clauses (a) to (c) of sub-rule (1) and at serial no. 11 of the Table below sub-rule (2) to the extent and subject to the conditions, if any, specified therein

Clause sub-clauses (a) to (c) of sub-rule (1) of Rule 2BB are as follows:-

(a) any allowance granted to meet the cost of travel on tour or on transfer;
(b) any allowance, whether, granted on tour or for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty;
(c) 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;

Serial no. 11 of the Table below sub-rule (2) of Rule 2BB

Sl. No. Name of allowance Place at which allowance is exempt Extent to which allowance is exempt
(1) (2) (3) (4)
[11. Transport allowance granted to an employee, who is blind [or deaf and dumb] or orthopaedically handicapped with disability of lower extremities, to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty Whole of India Rs.3200 per month

B. Extract of Revised clause (iii) of  sub-rule (7) of Income Tax rule 3 related to Valuation of perquisites

The value of free food and non-alcoholic beverages provided by the employer to an employee shall be the amount of expenditure incurred by such employer. The amount so determined shall be reduced by the amount, if any, paid or recovered from the employee for such benefit or amenity:

Provided that nothing contained in this clause shall apply to free food and non-alcoholic beverages provided by such employer during working hours at office or business premises or through paid vouchers which are not transferable and usable only at eating joints, to the extent the value thereof in either case does not exceed fifty rupees per meal or to tea or snacks provided during working hours or to free food and non-alcoholic beverages during working hours provided in a remote area or an off-shore installation.

Provided further that the exemption provided in the first proviso in respect of free food and non­alcoholic beverage provided by such employer through paid voucher shall not apply to an employee, being an assessee, who has exercised option under sub-section (5) of section 115BAC.

MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
New Delhi,

Notification No. 38/2020-Income Tax

Dated: 26th June, 2020

G.S.R. 415(E).—In exercise of the powers conferred by sub-section (2) of section 115BAC read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules,1962, namely:‑

1. Short title and commencement: – (1) These rules may be called the Income-tax (13th Amendment) Rules, 2020.

(2) They shall come into force from the 1st day of April, 2021 and shall accordingly apply in relation to the assessment year 2021-22 and subsequent assessment years.

2. In the Income-tax Rules, 1962,‑

(a) in rule 2BB, after sub-rule (2), the following sub-rule shall be inserted, namely:

“(3) Notwithstanding anything contained in sub-rule (1) and (2), an employee, being an assessee, who has exercised option under sub-section (5) of section 115BAC shall be entitled to exemption only in respect of the allowances mentioned in sub-clauses (a) to (c) of sub-rule (1) and at serial no. 11 of the Table below sub-rule (2) to the extent and subject to the conditions, if any, specified therein.”;

(b) in rule 3, in sub-rule (7), in clause (iii), after the proviso, the following proviso shall be inserted, namely:—

“Provided further that the exemption provided in the first proviso in respect of free food and non­alcoholic beverage provided by such employer through paid voucher shall not apply to an employee, being an assessee, who has exercised option under sub-section (5) of section 115BAC.”.

[Notification No. 38/2020/F. No.370142/15/2020-TPL]

GUDRUN NEHAR, Director (Tax Policy and Legislation)

Note: The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub-section (ii) vide number S.O. 969 (E), dated the 26th March, 1962 and last amended by the Income-tax (12th Amendment) Rules, 2020, vide notification number G.S.R. 338 (E) dated 29.5.2020

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