Question

Discuss whether an airline employee who was given a free airline ticket as a congratulations for a promotion which can be used on any flight in the Continental US with available seating (on a standby basis) must include the ticket value in gross income. Must they include the ticket value in gross income? EXPLAIN WHY OR WHY NOT. Assume the employee uses the ticket on a flight from New York City to Seattle and it is valued at $1,350.

Answer 1

ANSWER(1)

Transport allowance in general could mean allowance provided for the purpose of transport. However, transport allowance under Section 10(14) of Income-tax Act,1961 read with rule 2BB of Income-tax rules can be either of the following:

• Allowance granted to an employee to meet his expenditure for the purpose of commuting between his place of residence and office/place of duty

• Allowance granted to an employee working in transport business to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided employee is not in receipt of daily allowance.

But,In our case,Travelling allowance is given for promoting sales ,so this is the different thing.

Yes, Section 10(14) read with Rule 2BB provides for exemption of transport allowance. Exemption is as follows:

Transport allowance for commuting from place of residence to place of duty	Rs 1,600 per month or Rs 19,200 per annum
Transport allowance for commuting from place of residence to place of duty for an employee who is physically challenged such as blind/deaf/dumb or orthopaedically handicapped with disability of lower extremities	Rs 3,200 per month or Rs 38,400 per annum
Transport allowance for employee of transport business for meeting personal expenditure during running of such transport	Exemption amount shall be lower of following: a) 70% of such allowance; or b) Rs. 10,000 per month

These conditions must be fulfilled:-

In order to claim exemption of transport allowance granted to employee of non-transport business for commuting from residence to office, employee need not furnish any proof of expenditure and further the exemption limit is fixed and available irrespective of actual expenditure. However, the only condition that needs to be fulfilled is that the employee should not have already been provided with office transport /conveyance by employer for such purpose.

Further, in case of employees of transport business no daily allowance should have been provided by their employer in order to claim the exemption.