QUESTIONS & ANSWERS
Terminal travel allowance — how treated?
Under the Central Government rules, I received travel allowance applicable to retiring government servant to meet travel for self and family along with reimbursement of transport charges and a grant equal to one month’s pay for meeting incidental cost. I would like to know whether this would be tax exempt.
Travel grant to an employee would also be treated as part of the expenses on travel back to his permanent home over and above the actual cost of journey and transportation of personal effects on transfer. Rule 2BB(1)(a) covers both transfer and tour allowance.
If travel back home is treated as travel on transfer necessarily incurred in pursuance of employment, this rule should avoid liability.
There is no reason why it should not be so construed. Since the amount is paid as travel allowance under the same rule as on transfer, it should be treated as exempt under this rule, Since it is only a reimbursement of cost of journey, there is no profit element to be treated as profit in lieu of salary, so that it should not fall under Sec. 17(3) of the Act. Sec. 17(3)(iii) provides for liability on any lumpsum received after cessation of employment.
If such sum includes payments in the nature of gratuity, it may not be exempt. But mere travel allowance, including travel grant, should be exempt.
S. RAJARATNAM
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