The government has introduced revised transport allowance tax exemption limits for eligible specially-abled employees, substantially increasing the amount that can be claimed as tax-free from Financial Year 2026-27 onward. The move is expected to offer greater financial support amid rising commuting expenses and growing attention on workplace accessibility.
Under the revised framework applicable from Assessment Year 2027-28, eligible employees working in metro cities can claim transport allowance exemption of up to Rs 15,000 per month along with dearness allowance (DA). The revised amount is significantly higher than the existing exemption cap of Rs 3,200 per month.
The relief, however, is not meant for all salaried taxpayers. It remains restricted to certain categories of employees covered under existing income tax provisions. Eligible beneficiaries include individuals who are blind, deaf and mute, and those with orthopaedic disabilities affecting either upper or lower limbs.
The exemption structure now varies based on city classification. Employees in non-metro cities will be able to claim a tax exemption of up to Rs 8,000 per month plus dearness allowance. Metro cities under the revised framework include Delhi, Mumbai, Bengaluru, Kolkata, Chennai and Hyderabad.
For taxpayers filing returns for FY26, the existing Rs 3,200 monthly exemption will continue to remain applicable. The revised limits will only come into effect for returns relating to FY27.
The increase in exemption limits is expected to provide meaningful tax relief. Estimates suggest that eligible employees in metro cities could see a substantial rise in annual tax-free benefits under the revised structure.
Employees claiming the exemption are advised to review salary components, check Form 16 details and verify whether transport allowance has been included in their compensation structure. Employers are expected to incorporate the applicable exemption while calculating tax deducted at source.
The benefit will continue under both old and new tax regimes, ensuring continued support for eligible specially-abled employees.
