Transport Allowance Exemption 2026: New ₹15,000 & ₹25,000 Limits

For most salaried employees, transport allowance is fully taxable. The general ₹1,600-a-month exemption was replaced by the standard deduction in 2018. Two groups can still claim an exemption, and the Income-tax Rules, 2026 (in force from 1 April 2026) raised both limits sharply:

• Employees with specified disabilities: exempt up to ₹15,000 + DA a month in metro cities and ₹8,000 + DA elsewhere, up from ₹3,200. This applies in both tax regimes.
• Transport-system employees, such as drivers, conductors and crew: 70% of the allowance, up to ₹25,000 a month, up from ₹10,000. This applies under the old regime only.

This guide explains who qualifies, how to calculate the exemption, the 7th CPC transport allowance rates for central government staff, and how to claim it.

Transport allowance exemption at a glance (tax year 2026-27)

Metro cities for the disability limit are the eight cities named in the rules: Delhi, Mumbai, Kolkata and Chennai, plus Bengaluru, Hyderabad, Pune and Ahmedabad, which were newly added. The new limits apply from tax year 2026-27, under the Income-tax Act, 2025 read with the Income-tax Rules, 2026. For income up to 31 March 2026, the old limits apply.

Who can claim the exemption?

General employees: why transport allowance is taxable

Until 2017-18, salaried employees could claim ₹1,600 a month (₹19,200 a year) of transport allowance tax-free. From 2018-19, this exemption and the medical reimbursement exemption were replaced by a standard deduction. Today the standard deduction is:

• ₹75,000 under the new regime (the default), since 2024-25;
• ₹50,000 under the old regime.

Any transport or conveyance allowance paid for commuting is added to your taxable salary. A conveyance allowance for official duty, such as travel to client meetings, is different. It can be exempt to the extent actually spent on official work.

See tax-free salary allowances for the full list.

Worked examples

1. Employee with a disability, private company in Bengaluru

• Transport allowance received: ₹18,000 a month (no DA paid).
• Exemption limit (metro): ₹15,000 a month.
• Exempt: ₹15,000 a month (₹1,80,000 a year); taxable: ₹3,000 a month.

The exemption is available whether the employee chooses the old or the new regime.

2. Central government employee with a disability, Level 6, Delhi

• Transport allowance: double the normal rate, so 2 × ₹3,600 = ₹7,200 + DA at 60% = ₹11,520 a month.
• Exemption limit: ₹15,000 + DA thereon, which is well above the allowance.
• The full ₹11,520 a month is exempt.

3. Bus driver in a transport undertaking, old regime

• Allowance for personal expenses while on the move: ₹30,000 a month, with no daily allowance.
• 70% of ₹30,000 = ₹21,000, which is below the ₹25,000 cap.
• Exempt: ₹21,000 a month; taxable: ₹9,000 a month.

Under the new regime, the full ₹30,000 would be taxable.

4. General employee

• Transport allowance: ₹1,600 a month.
• Fully taxable. The relief comes only through the standard deduction.

Check the overall effect on your tax with the income tax calculator.

7th CPC transport allowance rates for central government employees

Central government employees receive transport allowance at fixed rates by pay level and city. The rates are higher in the 19 cities on the transport allowance list (TPTA cities), and DA is added on top.

• Level 1–2 employees with pay of ₹24,200 or more get the Level 3–8 rate.
• Employees with disabilities get double the normal rate, subject to a minimum of ₹2,250 + DA a month.
• The allowance changes with every DA revision. The figures above use 60% DA from January 2026.

For the full city list and calculations, see the 7th CPC transport allowance guide. See also DA for central government employees.

How to claim the exemption

1. Tell your employer and submit proof:
   • For disability: a disability certificate from the prescribed medical authority.
   • For transport staff: proof of your role.
2. Check your payslip to see whether payroll applies the exemption monthly, which reduces your TDS.
3. Check your salary certificate. From tax year 2026-27 this is Form 130, which replaced Form 16. The exempt allowance should appear in it.
4. In your return, report the gross allowance in the salary schedule and claim the exempt portion under exempt allowances. Keep the certificate in case you are asked for it.

Frequently asked questions

Is transport allowance taxable in 2026?

Yes, for most employees. Only employees with specified disabilities and transport-system employees can claim an exemption.

What is the transport allowance exemption for disabled employees from April 2026?

Up to ₹15,000 plus DA a month in the eight metro cities and ₹8,000 plus DA a month elsewhere, under the Income-tax Rules, 2026. Earlier it was ₹3,200 a month.

Can I claim the transport allowance exemption under the new tax regime?

Yes, if you have a specified disability. The exemption for transport-system employees (70%, up to ₹25,000) is available under the old regime.

What is the new limit for transport-system employees?

70% of the allowance, up to ₹25,000 a month, from 1 April 2026, provided no daily allowance is paid for the same purpose. Earlier the cap was ₹10,000.

Is the ₹1,600 transport allowance exemption still available?

No. It was withdrawn from 2018-19 and replaced by the standard deduction, which is now ₹75,000 in the new regime and ₹50,000 in the old.

What is the transport allowance for central government employees?

At 60% DA it ranges from ₹1,440 to ₹11,520 a month depending on pay level and city. For example, Level 3–8 employees in TPTA cities get ₹5,760.

Sources

• KPMG: Income-tax Rules, 2026 notified 20 March 2026 (revised allowance limits)
• Vialto Partners: Income-tax Rules, 2026 key highlights
• Department of Expenditure: 7th CPC orders on Transport Allowance

Position as of October 2026 under the Income-tax Act, 2025 and Income-tax Rules, 2026. For income up to 31 March 2026, the earlier limits apply. This is general information, not tax advice.