total travel allowance

Would you like to view this website in another language?

Travel allowance: A Comprehensive Guide for Employees

• Written by: Rinaily Bonifacio
• Last updated: 11 March 2024

This article will explain travel allowance, when and how you can use it, and tips for getting the most out of your expenses.

Table of contents

What is travel allowance?

How does business travel allowance usually cover, what is a flat travel allowance, what is the daily allowance, easy ways on how companies manage their procedures for business travel allowances, effective communication, how to manage business travel allowances.

Travel allowance is a type of compensation employers provide to cover employee travel expenses incurred when traveling for business purposes. It helps with employee travel costs, such as transportation, lodging, meals, and other incidentals while on the job. Depending on the company policy, travel allowance may be given in cash or as reimbursed expenses.

For example, some companies provide a fixed daily amount for meals and lodging that employees can use during their travels. Other companies cover expenses incurred by employees when they submit receipts after their trip has ended. This is known as per diem allowance or transport allowance.

Business travel allowance typically covers the cost of airfare, hotel accommodations, and meals. It may also include per diem allowances such as ground transportation, parking, and incidentals. The exact coverage will vary depending on the company's policies and the type of business trip.

A flat travel allowance is a set amount of money an employee provides for travel costs. The employee is responsible for managing the funds and ensuring they are used for the intended purpose. This allowance is typically used for short trips or employees who travel infrequently.

Employee scheduling and Time-tracking software!

• Easy Employee scheduling
• Clear time-tracking
• Simple absence management

A daily allowance, also known as a per diem, is a set amount of money provided to employees for money incurred daily while traveling for business purposes. It typically covers things such as

• Transportation
• And incidentals.

The allowance amount is usually based on the location and duration of the business trip and is intended to cover living costs for that specific location.

Daily allowances are provided in addition to other travel compensation types, such as lodging or airfare reimbursement. The amount and coverage of a daily budget will vary depending on the company's policies and the nature of the business travel.

Companies can manage their procedures for business travel allowances by establishing clear guidelines and policies. This should include information on who is eligible for the assistance, what travel costs are covered, and how to submit expense reports. Additionally, companies can use travel management software to track and approve payments and ensure company policy compliance.

It is also essential for companies to communicate effectively with employees about travel allowance policies so that they are aware of their rights and obligations. This can include providing training and support and regular updates on any policy changes.

By managing their procedures for business travel allowances in a clear and organized manner, companies can ensure that their employees have the resources they need to complete their business trips while also managing the company's expenses.

Another critical aspect of managing business travel allowances is to keep an eye on the per diem rates and lodging expenses. It is essential to ensure that these expenses are within the budget and are in line with the rates established by the General Services Administration (GSA). Companies should also consider implementing a system for meal allowance and car hire reimbursement, as well as for laundry services, parking fees, and other miscellaneous expenses.

To manage business travel allowances effectively, companies should establish clear guidelines for employees traveling within the continental United States and those traveling to foreign countries. This includes setting a budget for each travel and providing employees with the necessary forms for expense reporting and reimbursement.

In addition, companies can use data analysis to identify trends and patterns in travel expenses. This can help them make more informed decisions about travel policies and budgeting and potentially save money on future trips.

It's also important to consider the needs of business travelers and their families and to establish policies that support them. For example, companies may offer additional allowances for family members traveling with a business traveler or for international travel.

Overall, an efficient reimbursement system and clear travel policies can help ensure that employees are promptly reimbursed for their expenses and that the company's expenses are tracked and managed effectively. This can be a great way to manage business travel allowances and keep costs under control.

Written by:

Rinaily Bonifacio

Rinaily is a renowned expert in the field of human resources with years of industry experience. With a passion for writing high-quality HR content, Rinaily brings a unique perspective to the challenges and opportunities of the modern workplace. As an experienced HR professional and content writer, She has contributed to leading publications in the field of HR.

Please note that the information on our website is intended for general informational purposes and not as binding advice. The information on our website cannot be considered a substitute for legal and binding advice for any specific situation. While we strive to provide up-to-date and accurate information, we do not guarantee the accuracy, completeness and timeliness of the information on our website for any purpose. We are not liable for any damage or loss arising from the use of the information on our website.

Ready to try Shiftbase for free?

• Whistleblowing Policy
• First Aid in the Workplace
• Cell Phone Policy at Work
• Inclement Weather Policy
• Employee Non-disclosure Agreement

• Individual Tax Return
• Handle your audits
• Penalty Negotiation
• Handle your objections
• Travel allowance
• Tax Consulting
• Foreign Income Exemptions
• Am I a resident for tax purposes?
• Testimonials
• Request a Quote

What is Travel Allowance?

It has been about 2 -3 years when we published our initial article about travel allowances. Although tax law did not change that much, the industry did, and we thought it appropriate to update the previous article. Currently, many people still read the previous article, so we decided to keep that one intact and write this one to enhance the previous article.

This article will discuss a travel allowance, a travel re-imbursement allowance as well as the use of a company car or a leased company car and the tax implications of these.

Understanding a travel allowance

A travel allowance is when an employer pays an allowance to an employee for business kilometers travelled on behalf of his employer. In practice, employers often give a fixed amount monthly to the employee and may or may not issue the individual with a fleet or petrol card. In the case of a fixed allowance only, the amount paid during the tax period would appear under code 3701 on the IRP5. Where a petrol card is issued to the employee, the amount of petrol would also be added to the amount. To make sure this part is clear, let’s use an example:

An employee is given a fixed amount of R5 000 per month for using his personal vehicle to travel for business in execution of his duties. An amount of R5 000 * 12 months = R60 000 should appear under code 3701 on the IRP5 issued around May / June each year. Where the employee maintained a proper logbook during the year, a claim of up to R60 000 may be deducted against his income. Where the claim exceeds R60 000, SARS would limit the deduction to the amount under code 3701, 3702 and 3722 (These are all local travel codes which we will look at later)

An employee is given a fixed amount of R5 000 for executing his duties and a petrol card has been issued to the individual. Assume an amount of R50 000 was incurred on the fuel card during a tax period. Result, an amount of R5 000 * 12 months = R60 000 + R50 000 (use of petrol card) = R 110 000 would be included under code 3701. The deduction remains limited to the amount under code 3701.

Once the amount is established (found on the IRP5) the next step would be to consider a tax deduction. For this, a valid logbook must be maintained. A valid logbook must have the below minimum information:

• Opening and closing km
• Date of travel
• Area traveled from and to
• The amount of business km travelled
• The reason for the trip

In the event that any of the below information is missing, the logbook may be dismissed by SARS resulting in an additional assessment. SARS may contact the individual to have the logbook corrected during the audit process. However, this should be done correctly from the start.

• When submitting a return, always ensure that the opening km matches last year’s closing km. if the odometer does not match, SARS may dismiss the claim. If there is a reason for the mismatch, write a letter to SARS explaining the reason for the odometer mismatch. This could be for example, that the previous year’s logbook did not end on 28 February or that this year’s logbook did not start on 1 March in the current year. Whatever the reason is, make sure that a letter is written and that a reason be given for the odometer mismatch to avoid an additional assessment by SARS.
• Check the logbook for correctness by calculating closing km – opening km = private and business. This is a test to ensure that the car did not put on more km than the amount by which the card travelled for both private and business. For example, if closing km are 20 000 and opening was 5 000km then 20 000km – 5 000km = 15 000km travelled. If private was 8 000km and business was 8 000km then there is an error which needs to be corrected first.
• Make sure that the logbook corresponds with the service history of the car. Again, SARS may dismiss the entire claim when a discrepancy is found here on grounds that accurate records were not maintained.
• Ensure that private km is not unreasonable. Remember that a taxpayer wants the best result and SARS wants the best result also. Being too aggressive with business km could end up having the claim disallowed as the system could have picked up an unfavorable variable and human may agree. Further investigation may be warranted which could lead to a higher-level audit such as a forensic audit. Avoid this by maintaining accurate and reasonable records. In practice, we often see individuals having their claim denied as they tried to state that only 2 000 or 1 000 km were personal. Unless there are especially warranting circumstances, this would generally be wrong and could lead to complications.
• Trips between home to a person’s regular place of work is seen as private and not business km travelled. (Unless you are a judge) Thus, the area is from a taxpayer’s home to his regular place of work should be allotted to private travel.

Understanding a travel reimbursement allowance with the updates for tax year 2019

Some companies require that a form be completed or that a business trip be recorded electronically and that the employee would then be reimbursed a certain rate per business km travelled. An employer would not be interested in the opening km, closing km, etc. They are only interested in the amount of km travelled and the area traveled to. As such, a reimbursement record would not fulfill the requirements as above as expected by SARS. Thus, submitting this record to SARS would have the claim disallowed leading to complications. A proper logbook must still be maintained according to the requirements above.

As of 1 March 2018, where an employer reimburses an employee for business km travelled and the amount is equal to or less than the rate as determined by the commissioner (For tax year 2019 the amount is R3.61) the amount could be placed under code 3703 which means that the income is exempt from tax. In such case, there would be no requirement to maintain a logbook, but it is recommended to do so anyway incase the employer places the amount under 3702 and refuses to correct the IRP5.  In the past there was a limitation of kilometers but this was done away with as of the start of tax year 2019 which started 1 March 2018.

The no limit of kilometers within the prescribed rate of R3.61 (during tax year 2019) is new and a change from the past. During tax year 2018 (This being 1 March 2017 – 28 February 2018) there was a limit of 12 000km at a prescribed rate of R3.55. in other words, during tax year 2018, an employer would not be able to use code 3703 if the amount exceeded R3.55 * 12 000km = R42 600. During tax year 2017, the amount was less at a prescribed rate of R3.29 * 8 000km = R26 320.

If the employer pays any other compensation, then this code (3703) is not permitted and code 3702 should be used. The difference is that code 3703 is exempt from tax while 3702 is not and a claim against this must be made to not be taxed on this allowance.

It would therefore be impossible to give an employee an exempt reimbursement (3703) with a petrol card since “other compensation” is paid. The code would be changed to 3702 and the individual would be permitted to claim against the amount.

During tax year 2019 (March 2018 – February 2019) SARS brought in code 3722 which come as a result of code 3702 (a taxable travel reimbursement allowance) In our previous article we stated that an amount given by an employee under code 3702 is not taxed upon receipt but is included as income on assessment and fully included as income. A deduction could be made against this included income but where the full amount is not claimed, an amount must be paid in against this allowance. Due to this, many people that had a travel reimbursement allowance ended up filing their return and having to pay in on that return. This was especially the case where an employer pays a high rate (such as R4.50) and the individual has a low value car and travelled extensively during a tax period. To mitigate this problem, a new code was introduced, 3722. Where an individual is paid more than R3.61 (tax year 2019) per km travelled, the amount paid in excess would be placed under code 3722 and the employer would tax this amount upon receipt. (We welcome this approach)

An individual is paid R4.50 per km travelled and has travelled 10 000km for business. Therefore, R3.61 * 10 000 km = R36 100 (Placed under code 3702) and (R4.5 – R3.61) * 10 000 km = R8900 under code 3722. This means that the employer will not tax R36 100 upon receipt by the taxpayer but the R8900 will be subject to PAYE. The employee can claim the full amount under code 3702 and 3722 amounting to R45 000. In this example code 3703 (exempt travel allowance) may not be used since a rate higher than what is allowed has been paid to the employee.

Some people ask why an amount has to be paid in against these allowances while other people receive a tax refund while claiming against a travel allowance. The reason for this is that employers do not deduct taxes from an amount under code 3702. This could be illustrated in the following way. Imagine a bonus of R100 000 was paid to an employee and no taxes were deducted. When the return is filed the R100 000 would correctly be included as income but since no tax was paid on that amount, taxes would be paid on assessment. In a similar way, where an allowance is given without imposing taxes on the amount given, the amount remains income when a return is filed and unless the full allowance is claimed against, an amount would be due to SARS. Income cannot be received without taxes being imposed on the recipient.

A travel allowance (fixed amount per month with or without a petrol card) is different as such amount could be taxed at a rate of 20%, 80% or 100% upon receipt. The custom is to tax such amount at 80% which means that most of the allowance was taxed unlike a reimbursement allowance which was not taxed at all.

An individual is on the 41% tax margin and received a travel allowance of R60 000 and this allowance was taxed at a rate of 80% upon receipt. He maintained a proper logbook and was able to claim the full allowance of R60 000 as he has travelled enough business km to have the allowance claimed in full. Against the travel allowance, he can expect a refund of R60 000 * 80% * 41% = R19 680.

Assume the same situation under a travel re-imbursement allowance where the R60 000 was taxed at a rate of 0%

R60 000 * 0% * 41% = R0 (Since no taxes where withheld upon receipt)

Where the full amount cannot be claimed, then the inverse is true. Assume the individual can only deduct against his income an amount of R40 000 which means that R20 000 cannot be deducted.

R20 000 * 100% (not taxed) * 41% = R8200 to be paid in.

A reimbursement allowance in our view generally cause complications when the returns are submitted.

How to manually calculate your travel claim or structure a travel allowance

Below is an extract from the SARS tax tables for tax year 2019. Step 1 is to calculate the value of the car used at the time of purchase (not the current market value) Use the purchase agreement for this and remember to include extras, VAT and the initiation costs but exclude any finance charges. Let’s assume the value of the car is R500 000 at the time of purchase. This means that SARS will grant R153 850 as fixed cost for that car for a full period. If the car was not used for the full period, the amount must be apportioned by calculating the number of days the car was used over the number of days in a tax year (365 or 366) This is the amount SARS will grant for the car irrespective of the amount of km travelled during the year of assessment. Divide this amount by the number of km travelled with this car for the year. This will give a rate per km travelled for that car. Add to this amount the below rate per km for fuel and maintenance to arrive at the total amount allowed as a deduction per business km travelled during a tax period.

An individual received a total travel allowance of R150 000 under code 3701 and used a car with the value of R500 000 during the period of assessment. A total amount of 20 000 km was done of which 10 500 km were from business and the taxpayer maintained a proper logbook.

An individual with a travel allowance of R150 000 travelled 20 000km of which 10 500 km were for business between 1 April 2018 to 28 February 2019 using a vehicle to the value of R500 000. Calculate the travel claim:

Assume the same information as with example 6 except that the allowance under code 3701 was R75 000:

• When purchasing a new car, consult with your tax practitioner to determine the bracket in which the new car will fall. It may be worthwhile paying a bit more (add an extra or two) to get the car in a higher deduction bracket. Example, if the car is sold for R424 500 why not add something to get the value over R425 001 so that a higher deduction bracket is applied when filing the next return.
• Ensure that the travel allowance granted by the employer is enough in relation to the value of the car and the amount of business km travelled. If a car is being used for business travel and many km are racked up, the deduction would be limited to the amount on the IRP5. The balance would be disregarded and lost. Make sure the amount on the IRP5 is more than the claim to collect the full benefit.
• If you are one that travels plenty of km per year, consider purchasing two vehicles and alternating with the cars. The reason for this recommendation is the more km travelled with a single car, the less SARS will allow as a deduction per km travelled under the fixed cost section (Not the fuel and maintenance) Adding a second car allows two fixes costs since two vehicles are being used. This is not valid for a person that does not travel extensively for business.
• The fewer km travelled in a year – the more SARS allows as a deduction per km travelled under the fixed cost section. If total of 20 000 km travelled (This is total which includes private and business km) with a car that has a value of R400k, the fixed cost awarded would be R112 443 / 20 000 = R5.622. The same situation but with a total of 10 000km means a rate of R112 443 / 10 000 = R11.244 per km travelled under the fixed cost section. This will not boost the refund but would rather preserve the car while still claiming against the car for business km. one would have the car for a longer period to claim against suppose to racking up km.
• Maintain a proper and detailed logbook to avoid the claim from being disallowed.

An individual can only claim against a travel allowance once they have such allowance granted to them. If a person is self-employed (Sole proprietor) or is an independent contractor or is in receipt of mostly commission income, the tax tables may not be used. Rather, Section 11a of the income tax act needs to be applied which states and an amount “actually incurred’ must be deducted. In this regard, wear and tear may be claimed on the vehicle (7 years for a brand-new car) and amounts incurred on fuel, maintenance, insurance, interest, licensing fees, etc. may be claimed. (Wear and tear for a car where ownership changes such as an installment sale agreement or monthly rental paid in a case where ownership does not vest to the taxpayer) This is a lot more complicated and warrants assistance using a tax practitioner.

A company car and company leased car works differently

We have spent a lot of time understanding how a travel allowance works and going through various examples. How about the use of a company car?

A company car is disclosed under code 3802 on an IRP5. When an employer provides an employee with a company owned vehicle, a monthly fringe benefit of 3.5% or 3.25% of the value of the car including VAT is added to their income depending on whether a maintenance plan was included or not included. (The cost of fuel should not be included in addition to the above amount) This means that either 39% (3.25*12) or 42% (3.5* 12) of the value of the car is included as income to the employee. (This amount may be reduced by the amount an employee pays towards the vehicle)

The employee may claim against the use of a company car provided that a valid logbook, as discussed above, was maintained to record business km. The percentage the vehicle was used for business may be deducted against to total fringe benefit amount.

An employee has the use of a company car, with a maintenance plan, which has a value of R550 000 (Inc VAT) and has travelled 25 000 km of which 14 000 km was for business.

Included under code 3802 (Taxable fringe benefit for use of company provided vehicle)       R214 500 (Calculated as 3.25% *12 months * R550 000)

Reduced by percentage used for business 14000/25000 * R214 500                                             -R120 120

Resolving a problem with a travel allowance

• Name * First Last
• Name This field is for validation purposes and should be left unchanged.

Travel allowance structure (Published 26/09/2016)

We work with so many people and have often found that many do not have their travel allowances properly structured and this could lead to problems such as amounts to be paid in when the income tax return is filed or amounts lost as the allowance is too low but the amount on the IRP5 is the ceiling or maximum amount that SARS will allow to be deducted.

For example; let’s say that you have a car to the value of R200 000 and a travel allowance of R40 000. Your allowance on the IRP5 under code 3701 and or 3702 is R40 000, as stated above, but you have done enough business km to claim, say, R70 000 against your allowance. Now, SARS will only allow R40 000 to be deducted from your income as this is the ceiling amount. This means that you have lost a claim of R30 000 * your tax rate (let’s assume 31%) so a loss of R9300. Would it not have been better to get advice on where the allowance should be?

Get your allowance right

The other side of the coin is as follows. Say you have a huge travel allowance in relation to the value of your car and your company taxes the allowance at only 20% (your company can tax it at a rate of 20% or 80%), you might have to pay in on the return as you would have to claim 80% of your travel allowance but if the allowance was excessive to begin with, there will be an amount to be paid in on the return. So, despite working hard and going through the SARS audit, there might still be an amount to be paid in.

Therefore, understand your allowance and get it right the first time. When we recommend a structure, we document our working and issue you with a letter which your HR or payroll can simply implement.

South Africa: Is A Logbook Really Necessary? Or Can SARS Use Code 3702 To Audit Potential Business Kilometers Travelled?

I have often wondered whether the South African Revenue Service (SARS) officials thoroughly review the submitted logbooks when taxpayers claim for travel expenses incurred as a result of business travel or are these requested just to tick a box? This sense of wonder has been recently resolved, SARS audits the logbooks to the extent of even requesting the details of the person or company being visited.

SARS recently changed the format in which logbooks should be captured. It is now compulsory to keep a logbook of all business kilometres travelled if taxpayers want to claim a travel deduction. The logbook must contain the following minimum information relating to business travel:

• The date of travel
• Total Kilometres travelled (business and private)
• Travel details (where to and reason for the trip)

Taxpayers have to record their odometer readings on 1 March each year (the first day of the tax year for individuals), and again on the last day of February the following year (the last day of the tax year for individuals).

The difference between the closing and opening readings will give the total kilometres travelled for the year.

It is true that the above exercise can be quiet stressful sometimes, you could also simply forget to update the logbook timeously. Which again poses the question of whether the logbooks submitted to SARS are a true reflection of the taxpayers business travel.

SARS however reserves the right to audit and query the content or information recorded by the taxpayer in any logbook.

Is there not a way to redirect SARS audit focus and resources on other things?

Let's look into this further.

Travel Allowance

The Income Tax Act No.58 of 1962 (Income Tax Act) allows taxpayers who receive a travel allowance to claim a deduction for the use of their private vehicles for business purposes. Reference is made to Section 8 (1)(b)(ii)&(iii) of the Income Tax Act.

A travel allowance is any allowance paid or advance given to an employee in respect of travelling expenses for business purposes.

Generally, the two different travel allowance classifications are-

• A travel allowance given to an employee to finance transport (for example, a set rate or amount per pay period).
• A reimbursement given to an employee based on actual business travel.

Let us now have a look at the difference between the two.

Travel allowance

The total travel allowance (100%) must be reflected on the IRP5 certificate under code 3701.

80% of the travel allowance paid to an employee is subject to the deduction of employees' tax. Where the employer is satisfied that at least 80% of the use of the motor vehicle for a year of assessment will be for business purposes. 20% of the allowance is subject to the deduction of employees' tax. This determination must be done on a monthly basis to cater for any possible changes in employee's circumstances.

A perfect example of this would be the working situation during the current Covid 19 pandemic. Employees had structured their packages to cater for business travel but during the pandemic, no travel or even less travel was required.

Reimbursive allowance

A reimbursive travel allowance is where an allowance or advance is based on the actual distance travelled for business purposes (that is excluding private use). For the 2022 tax year, the rate per kilometre fixed by the Minister of Finance is currently 3.82 per kilometre.

It is trite practice that most employers would offer their employees a rate per kilometre that is above the fixed rate by the Minister (e.g. R4,40 instead of R3,82) - reference is made to Notice 271 of the Government Gazette, paragraph 4 of the Fixing of Rate per Kilometre i.e. Motor Vehicle Regulation. In such an instance, the IRP5 code to use is code 3702, which is a taxable code.

Where the employer reimburses the employee at a rate lower than the prescribed rate (e.g. R3,70 instead of R3,82), the IRP5 code to use is 3703 which is a non-taxable code.

Let us now assume that the employee received both travel allowance and reimbursive allowance of code 3702 and discuss below.

Hybrid of travel allowances

Where a travel allowance is paid in addition to a reimbursive allowance or reimbursive allowance is paid in addition to a travel allowance, both the amounts will be combined on assessment by SARS. These combined allowances will be treated as a taxable travel allowance. Generally, the employee will claim a travel deduction based on kilometres travelled. But before SARS can allow this deduction, it requires a logbook as discussed above.

Let us now address our question of whether a logbook is required or SARS can use the code 3702 to determine the business travel for the tax year.

Considering the hybrid of travel allowances mentioned above, the general business practice is that employers will reimburse employees based on business kilometres travelled. Is it not correct then to consider what is reflected under the reimbursement code 3702 as business kilometres travelled?

The only question from SARS should be how much was the employers' reimbursement rate or by how much is the employers' reimbursement rate high when compared to the fixed rate by the Minister?

Example: The total business kilometres travelled for the period is 21 000km per the taxpayer's submitted logbook. The amount that is reflected under code 3702 is R48 000. It was confirmed that the company reimburses its employees at a fixed rate of R4,40. Therefore the estimated business travel for the said employee should be R48 000/R4,40 = 10 909 business kilometres that were approved and paid by the employer.

The question for SARS to pose then would be - why are the business kilometres per the logbook submitted by taxpayers higher than what was reimbursed by the employer?

Example: code 3702 reflects R48 000 as indicated above, which deems the employee to have travelled 10 909 kilometres for business purposes vs a logbook showing 21 000 business kilometres travelled (difference of 12 091 i.e. 21 000 km - 10 909 km.).

Well, it may be arguable to say that the taxpayer did not claim all its travel expenditure (due to one reason or the other) hence the amount reflecting under code 3702 is less than the actual business kilometres per the logbook.

This argument would again be reasonable if the variance between the actual business kilometres per the logbook and deemed business kilometres per code 3702 is not material.

Now taking the difference of business kilometres not claimed in the above example of 12 091, this would imply that the taxpayer forego R53 200 ( 12 091 x R4,40) worth of travel reimbursement. Now, show me an employee that does not want to be compensated or reimbursed for expenditure incurred for business purposes!

The onus is still however on the taxpayer or employer to prove to SARS the correctness of the details therein.

Being tax compliant and 'paying our fair share' is not just good for taxpayers, but also contributes to the positive growth of our country's economy which in turn benefits all South Africans.

In line with SARS's continued effort to improve compliance and to make it even easier for taxpayers to manage their tax affairs, a review of the process followed currently to claim travel expenses will go a long way . We therefore urge SARS to continue trying to find means and ways for more taxpayers to be auto assessed- e.g. auto assessment of allowing a travel deduction based on code 3702. This will help lessen the administration burden of having to maintain yearly logbooks. The normal rule will apply where if a taxpayer is not in agreement with the auto-assessment, and can over-ride it.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

  © Mondaq® Ltd 1994 - 2024. All Rights Reserved .

Login to Mondaq.com

Password Passwords are Case Sensitive

Forgot your password?

Why Register with Mondaq

Free, unlimited access to more than half a million articles (one-article limit removed) from the diverse perspectives of 5,000 leading law, accountancy and advisory firms

Articles tailored to your interests and optional alerts about important changes

Receive priority invitations to relevant webinars and events

You’ll only need to do it once, and readership information is just for authors and is never sold to third parties.

Your Organisation

We need this to enable us to match you with other users from the same organisation. It is also part of the information that we share to our content providers ("Contributors") who contribute Content for free for your use.

Travel and Expense

What is a travel allowance definitions and insights.

A travel allowance can be an effective way to manage employee travel expenses and manage costs for the employee. 

When employees travel for business, there are myriad expenses, from hotels to taxis or ride-sharing services. Using a travel allowance can help give travelers flexibility and control while increasing compliance with tax regulations. 

What Is a Travel Allowance? 

A travel allowance is compensation paid by an employer to employees to cover expenses incurred when traveling for business. In addition to lodging and transportation, travel allowances are typically used for airfare, meals, and other expenses related to business travel. It is business travel compensation, provided either before or after travel is completed. 

Managing business travel compensation can be complex and hard to manage. The way businesses handle travel compensation is changing, as leaders look to implement tools that aid travelers and companies alike. 

Technology is transforming how companies manage all aspects of employee travel , including the creation and coordination of travel allowances. 

Types of Travel Allowance 

There are many types of travel allowances, which can be given upfront or based on a reimbursement schedule. Here is a look at some of the most common. 

Fixed Travel Allowance 

A fixed travel allowance is a flat rate that is offered to an employee, irrespective of the level of expenses incurred. Employees are responsible for managing their travel expenses and determining how to use the money best to accommodate their needs. It is commonly used with employees for short trips or who travel infrequently. 

Typically, with a fixed allowance, if the employee spends less than the allocated amount, the employee can keep the difference. If the employee spends more, they are responsible for making up the difference. Businesses using fixed travel allowance should work with their tax professional to understand the implications of this practice. 

Daily Travel Allowance 

Also called a per diem, a daily travel allowance is an amount used for each day of travel and can be used for lodging, transportation, meals, and other travel expenses. Typically, a traveler will reconcile the per diem by submitting an expense report and receipts. The traveler will be reimbursed for any expenses they spent in excess and will return money that was unspent. 

Travel Reimbursement 

This travel allowance requires the traveler to submit receipts for actual expenses incurred, which are then reimbursed. This process can be cumbersome and time-consuming for the traveler. If reimbursement is not done in a timely manner, it can be burdensome for the employee, who is essentially lending money to the company. Fortunately, there are technologies available today to simplify this work. 

Mileage Allowance 

This type of allowance pays the employee for miles traveled on business. It is typically used when employees use their own car for business-related travel. Technologies can tracking and  reimbursing for mileage simpler and more accurate. 

Methods for Calculating Travel Allowances 

When using travel allowances as part of a corporate travel program, one key consideration is how the travel allowances are calculated. 

The process often has to consider the distance traveled and the time spent traveling. Here is one way to calculate a travel allowance. 

Location and Days of Travel 

Start by determining the location of the traveler at midnight on each day of travel. A day of travel is defined as a 24-hour period an employee is conducting business while traveling. 

The day of travel ends when the next day starts or they return home from a business trip to their home or office. For example, if an employee leaves for a trip at 4 p.m., the first day of travel is from 4 p.m. that day until 4 p.m. the next. 

Lodging allowances are provided based on whether an employee spends the night in accommodations other than their own home. Typically, lodging allowances are based on the location and the current price rates for various hotel categories, based on company preferences for the level of hotels allowed. 

Unlike with other categories, usually lodging is an either/or determination. Employees are either allowed the lodging allowance or not based on the circumstances of the trip. 

Like with lodging, meal allowances are usually based on the prevailing costs of meals in each location. It assumes that a traveler will have three meals a day. 

Typically, a meal allowance covers both meals and incidentals, such as snacks. Often it is prorated based on the time in any given day a traveler is on the road. 

The meal allowance may also be reduced if there are meals provided as part of the work travel, such as part of a conference registration fee or transportation ticket. 

Managing Travel Allowances 

Managing travel allowances is a complex task. Here are some tips on how to effectively implement and manage a program: 

• Develop a Clear Policy. Travelers need to understand the specifics in your travel program and how allowances are used. The policy needs to spell out, for example, what expenses are allowed and not allowed and the ways in which allowances are calculated. Transparency is essential to ensure all employees understand how travel expenses are covered 
• Consider Incidentals. Business travelers face many complexities and challenges. You want a policy that makes it easy for travelers to navigate while on the road. Be sure your policy covers costs that may arise, including parking, fuel, tips, laundry services, printing, internet fees, and luggage check fees 
• Analyze Data. You need a system in place that collects and reports on travel data to allow you to better understand trends, shifts and challenges. With visibility into your travel program, you can make timely, well-informed decisions 

Developing Travel Allowance Policies and Guidelines 

If your company wants to develop a travel allowance policy, where should you begin? 

The policy should be rooted in a broader travel policy which should consider the following: 

• Scope. What aspects of business travel will your policy cover? 
• Coverage. Determine which elements of travel the policy will cover, such as air travel, lodging, meals, incidentals, and ground transportation 
• Reimbursement Types. Will your company use travel allowances and, if so, which types? 
• Participation. How will policies be determined? Be sure to include staff from human resources, finance, and departments that frequently travel, in determining the policy 
• Safety. Be sure your policy provides protection for employees while they are traveling  
• Expense Reporting. Develop tools or adopt that will be used for the reporting of travel expenses, with an emphasis on scalability, technology integration, and ease of use 

Technological Advancements in Travel Allowance Management 

Technology is changing the way companies manage business travel . There are powerful platforms available today that integrate travel policies, allow for the booking of travel and itinerary management and provide robust data collection and travel. 

Employees need access to easy-to-use tools that allow for the recording of receipts and other transactions, let them reconcile expenses and generate expense reports, and simplify approvals and routing. 

SAP Concur solutions can provide companies with integrated business travel, expense, and invoice solutions. With SAP Concur solutions, companies can book travel, manage expenses, integrate with business systems, manage invoices, and more. 

Learn more about how SAP Concur solutions can simplify your travel management . 

An official website of the United States Government

• Kreyòl ayisyen
• Search Toggle search Search Include Historical Content - Any - No Include Historical Content - Any - No Search
• Menu Toggle menu
• INFORMATION FOR…
• Individuals
• Business & Self Employed
• Charities and Nonprofits
• International Taxpayers
• Federal State and Local Governments
• Indian Tribal Governments
• Tax Exempt Bonds
• FILING FOR INDIVIDUALS
• How to File
• When to File
• Where to File
• Update Your Information
• Get Your Tax Record
• Apply for an Employer ID Number (EIN)
• Check Your Amended Return Status
• Get an Identity Protection PIN (IP PIN)
• File Your Taxes for Free
• Bank Account (Direct Pay)
• Payment Plan (Installment Agreement)
• Electronic Federal Tax Payment System (EFTPS)
• Your Online Account
• Tax Withholding Estimator
• Estimated Taxes
• Where's My Refund
• What to Expect
• Direct Deposit
• Reduced Refunds
• Amend Return

Credits & Deductions

• INFORMATION FOR...
• Businesses & Self-Employed
• Earned Income Credit (EITC)
• Child Tax Credit
• Clean Energy and Vehicle Credits
• Standard Deduction
• Retirement Plans

Forms & Instructions

• POPULAR FORMS & INSTRUCTIONS
• Form 1040 Instructions
• Form 4506-T
• POPULAR FOR TAX PROS
• Form 1040-X
• Circular 230

IRS issues standard mileage rates for 2023; business use increases 3 cents per mile

More in news.

• Topics in the News
• News Releases for Frequently Asked Questions
• Multimedia Center
• Tax Relief in Disaster Situations
• Inflation Reduction Act
• Taxpayer First Act
• Tax Scams/Consumer Alerts
• The Tax Gap
• Fact Sheets
• IRS Tax Tips
• e-News Subscriptions
• IRS Guidance
• Media Contacts
• IRS Statements and Announcements

IR-2022-234, December 29, 2022

WASHINGTON — The Internal Revenue Service today issued the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on January 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
• 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
• 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.

These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces .

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

Notice 2023-03 PDF contains the optional 2023 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2023 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.

•  Facebook
•  Twitter
•  Linkedin

An official website of the United States government

Here’s how you know

Official websites use .gov A .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPS A lock ( ) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

• Explore sell to government
• Ways you can sell to government
• How to access contract opportunities
• Conduct market research
• Register your business
• Certify as a small business
• Become a schedule holder
• Market your business
• Research active solicitations
• Respond to a solicitation
• What to expect during the award process
• Comply with contractual requirements
• Handle contract modifications
• Monitor past performance evaluations
• Explore real estate
• 3D-4D building information modeling
• Art in architecture | Fine arts
• Computer-aided design standards
• Commissioning
• Design excellence
• Engineering
• Project management information system
• Spatial data management
• Facilities operations
• Smart buildings
• Tenant services
• Utility services
• Water quality management
• Explore historic buildings
• Heritage tourism
• Historic preservation policy, tools and resources
• Historic building stewardship
• Videos, pictures, posters and more
• NEPA implementation
• Courthouse program
• Land ports of entry
• Prospectus library
• Regional buildings
• Renting property
• Visiting public buildings
• Real property disposal
• Reimbursable services (RWA)
• Rental policy and procedures
• Site selection and relocation
• For businesses seeking opportunities
• For federal customers
• For workers in federal buildings
• Explore policy and regulations
• Acquisition management policy
• Aviation management policy
• Information technology policy
• Real property management policy
• Relocation management policy
• Travel management policy
• Vehicle management policy
• Federal acquisition regulations
• Federal management regulations
• Federal travel regulations
• GSA acquisition manual
• Managing the federal rulemaking process
• Explore small business
• Explore business models
• Research the federal market
• Forecast of contracting opportunities
• Events and contacts
• Explore travel
• Per diem rates
• Transportation (airfare rates, POV rates, etc.)
• State tax exemption
• Travel charge card
• Conferences and meetings
• E-gov travel service (ETS)
• Travel category schedule
• Federal travel regulation

Travel policy

• Explore technology
• Cloud computing services
• Cybersecurity products and services
• Data center services
• Hardware products and services
• Professional IT services
• Software products and services
• Telecommunications and network services
• Work with small businesses
• Governmentwide acquisition contracts
• MAS information technology
• Software purchase agreements
• Cybersecurity
• Digital strategy
• Emerging citizen technology
• Federal identity, credentials, and access management
• Mobile government
• Technology modernization fund
• Explore about us
• Annual reports
• Mission and strategic goals
• Role in presidential transitions
• Get an internship
• Launch your career
• Elevate your professional career
• Discover special hiring paths
• Events and training
• Agency blog
• Congressional testimony
• GSA does that podcast
• News releases
• Leadership directory
• Staff directory
• Office of the administrator
• Federal Acquisition Service
• Public Buildings Service
• Staff offices
• Board of Contract Appeals
• Office of Inspector General
• Region 1 | New England
• Region 2 | Northeast and Caribbean
• Region 3 | Mid-Atlantic
• Region 4 | Southeast Sunbelt
• Region 5 | Great Lakes
• Region 6 | Heartland
• Region 7 | Greater Southwest
• Region 8 | Rocky Mountain
• Region 9 | Pacific Rim
• Region 10 | Northwest/Arctic
• Region 11 | National Capital Region
• Per Diem Lookup

Travel resources

Per diem look-up, 1 choose a location.

Error, The Per Diem API is not responding. Please try again later.

No results could be found for the location you've entered.

Rates for Alaska, Hawaii, U.S. Territories and Possessions are set by the Department of Defense .

Rates for foreign countries are set by the State Department .

2 Choose a date

Rates are available between 10/1/2021 and 09/30/2024.

The End Date of your trip can not occur before the Start Date.

Traveler reimbursement is based on the location of the work activities and not the accommodations, unless lodging is not available at the work activity, then the agency may authorize the rate where lodging is obtained.

Unless otherwise specified, the per diem locality is defined as "all locations within, or entirely surrounded by, the corporate limits of the key city, including independent entities located within those boundaries."

Per diem localities with county definitions shall include "all locations within, or entirely surrounded by, the corporate limits of the key city as well as the boundaries of the listed counties, including independent entities located within the boundaries of the key city and the listed counties (unless otherwise listed separately)."

When a military installation or Government - related facility(whether or not specifically named) is located partially within more than one city or county boundary, the applicable per diem rate for the entire installation or facility is the higher of the rates which apply to the cities and / or counties, even though part(s) of such activities may be located outside the defined per diem locality.

City Pair airfares

Visit City Pair Program to learn about its competitive, federally-negotiated airline rates for 7,500+ domestic and international cities, equating to over 13,000 city pairs.

• Search for contract fares

Note: All fares are listed one-way and are valid in either direction. Disclaimer - taxes and fees may apply to the final price

Taxes and fees may apply to the final price

Your agency’s authorized travel management system will show the final price, excluding baggage fees. Commercial baggage fees can be found on the Airline information page.

Domestic fares include all existing Federal, State, and local taxes, as well as airport maintenance fees and other administrative fees. Domestic fares do not include fees such as passenger facility charges, segment fees, and passenger security service fees.

International

International fares do not include taxes and fees, but include fuel surcharge fees.

Note for international fares: City codes, such as Washington (WAS), are used for international routes.

Federal travelers should use their authorized travel management system when booking airfare.

• E-Gov Travel Service for civilian agencies.
• Defense Travel System for the Department of Defense.

If these services are not fully implemented, travelers should use these links:

• Travel Management Center for civilian agencies.
• Defense Travel Management Office for the Department of Defense.

GSA lodging programs

Shop for lodging at competitive, often below-market hotel rates negotiated by the federal government.

FedRooms provides federal travelers on official business with FTR compliant hotel rooms for transient and extended stays (up to 29 days). The program uses FEMA and ADA-compliant rooms with flexible booking terms at or below per diem rates. Federal employees should make reservations, including FedRooms reservations, via their travel management service.

Visit GSALodging for more details on FedRooms and for additional programs offering meeting space, long term lodging, and emergency lodging.

Privately owned vehicle (POV) mileage reimbursement rates

GSA has adjusted all POV mileage reimbursement rates effective January 1, 2024.

* Airplane nautical miles (NMs) should be converted into statute miles (SMs) or regular miles when submitting a voucher using the formula (1 NM equals 1.15077945 SMs).

For calculating the mileage difference between airports, please visit the U.S. Department of Transportation's Inter-Airport Distance website.

Plan a trip

Research and prepare for government travel.

Per diem, meals & incidental expenses (M&IE) Passenger transportation (airfare rates, POV rates, etc.) Lodging Conferences/meetings Travel charge card State tax exemption

Services for government agencies

Programs providing commercial travel services.

Travel Category Schedule (Schedule L) E-Gov Travel Service (ETS) Emergency Lodging Services (ELS) Employee relocation

Travel reporting

Federal Travel Regulation Table of contents Chapter 300—General Chapter 301—Temporary Duty (TDY) Travel allowances Chapter 302 - Relocation allowances

• ATO Community
• Legal Database
• What's New

Log in to ATO online services

Access secure services, view your details and lodge online.

Declaring your travel allowance and claiming expenses

What to do if you receive a travel allowance to cover your travel expenses when travelling for work.

Last updated 25 April 2023

Deductible travel allowance expenses

Receiving a travel allowance from your employer does not automatically entitle you to claim a deduction for travel expenses.

A travel allowance expense is a deductible travel expense :

• you incur when you're travelling away from your home overnight to perform your employment duties
• that you receive an allowance to cover
• for accommodation, meals (food or drink), or incidentals.

You incur a travel allowance expense when you either:

• actually pay an amount for an expense
• have an obligation to pay an amount for the expense.

You can't claim a deduction if your employer either pays for or reimburses you for the expense.

If you don't incur any deducible travel allowance expenses, there is no need to consider if a travel allowance record keeping exception applies .

Example: no deductible travel allowance expenses incurred

Ainsley lives in Melbourne and is the regional manager of a clothing store chain. She must travel to Sydney for 3 days to attend the annual conference of managers.

Ainsley’s employer pays for her accommodation in Sydney, but she buys her own meals. When she returns to the office, Ainsley puts in a reimbursement claim for her meals, and her employer reimburses her for these expenses.

As Ainsley doesn't incur accommodation expenses and receives a reimbursement for the meal expenses, she can't claim a deduction for these expenses.

Since Ainsley hasn't received an allowance and she can't claim a deduction for her accommodation and meals, she doesn't need to consider whether she can rely on the travel allowance record keeping exception.

What to do if you receive a travel allowance

If your travel allowance is shown as an allowance on your annual income statement or payment summary, you:

• must include the allowance as income in your tax return
• can claim a deduction for the amount you spent on deductible travel allowance expenses
• you don't need to keep detailed records if your deduction for travel allowance expenses is within the reasonable amounts we specify.

If your travel allowance isn't shown on your annual income statement or payment summary and you spent the whole amount on deductible expenses, you:

• don't include the allowance as income in your tax return
• can't claim any deduction for your travel allowance expenses
• don't need to keep written evidence or travel records.

If you do this, you will not pay any income tax on your travel allowance.

However, if you spent more than your travel allowance on deductible travel allowance expenses, you:

• include the allowance as income in your tax return
• can claim a deduction for your travel allowance expenses
• you don't need to keep detailed records if your deduction for travel expenses is within the reasonable amounts we specify.

Example: travel allowance on income statement

William works for a company in Sydney. William’s employer requires him to visit clients in country New South Wales once a month. This involves William sleeping away from his home for 3–4 nights.

William’s employer pays him an allowance of $150 per night to cover accommodation, meal and incidental expenses, and includes the allowance on his income statement.

As William’s employer reports the travel allowance on his income statement, William must include the allowance as income in his tax return. He can claim a deduction for the amount he spends on accommodation, meals and incidental expenses while he is travelling away from his home overnight for work.

Unless he can rely on the travel allowance record keeping exception, William will have to keep receipts or other written evidence for all his accommodation, meals and incidental expenses.

Example: travel allowance not reported on income statement

George's employment duties require him to occasionally travel away from his home overnight. When he travels overnight for work, his employer pays him an allowance of $80 to cover accommodation expenses and reimburses him for the cost of his meals. George's employer doesn't show the allowance on his income statement.

When George travels overnight for work he stays in the same place, which costs him $100 per night.

As the travel allowance isn't on George's income statement and he has spent the entire allowance on deductible travel allowance expenses, he doesn't need to:

• declare the travel allowance as income in his tax return
• keep written evidence of his accommodation expenses.

George also can't claim a deduction for the expenses.

However, as George has spent more than the amount of the allowance on deductible travel allowance expenses, he can include the amount as income in his tax return. He can then claim a deduction for the amount he spent on accommodation. Unless George can rely on the travel allowance record keeping exception, he will have to keep written evidence.

Enable JavaScript

Please enable JavaScript to fully experience this site. How to enable JavaScript

• At the airport

Checked bag policy

Checked bag allowances.

Changes to bag allowances and fees have been updated as of February 20, 2024.

Travel within / between the U.S., Puerto Rico, and U.S. Virgin Islands – 1st checked bag fee is $40 ($35 if you pay online) and the 2nd checked bag fee is $45.

Travel to / from Canada, Caribbean, Mexico, Central America, and Guyana – 1st checked bag fee is $35 and the 2nd checked bag fee is $45.

All bag fees are non-refundable and apply per person, at each check-in location, each way, even if you purchase or get an upgrade that includes free checked bags. If you believe you've been incorrectly charged for bag fees, contact an American representative for help or file a refund claim within 45 days.

• Bag limitations
• Bag and optional fees

How many bags can you take?

Check up to 10 bags on american airlines operated flights if your trip is:.

• Transatlantic
• Transpacific

Check up to 5 bags on American-operated flights if you’re traveling to / through / from:

• Mexico / Caribbean / Central America*
• South America*
• Bag regions

*There are seasonal and year-round bag restrictions

We calculate the size limits of your bag by adding the total outside dimensions of each bag, length + width + height.

For all regions, except to / from Australia or New Zealand, your checked bag allowance is:

• Dimension: 62 in / 158 cm
• Weight: 50 lbs / 23 kgs
• For First / Business, weight is 70 lbs / 32 kgs for complimentary bags and 50 lbs / 23 kgs for excess charged bags

For all confirmed customers on flights to / from Australia or New Zealand:

• Weight: 70 lbs / 32kgs for complimentary bags and 50 lbs / 23 kgs for excess charged bags
• Oversize and overweight bags

What it will cost

In some cases, you won't have to pay the fees for up to 3 bags when traveling on itineraries marketed and operated by American Airlines. If you qualify for complimentary bags based on your AAdvantage ® status or one world ® status, the benefits are based on your highest status level at time of ticketing or check-in.

If your status level is:

• Higher at ticketing than at check-in, show your ticket receipt to the airport agent
• Lower at ticketing than at check-in, current benefits will automatically apply

Free checked bags may not apply to codeshare flights operated by our partners. Visit the website of the airline operating your flight for details.

Other airlines

1st checked bag is complimentary for:

• Eligible AAdvantage ® Aviator ® and Citi ® / AAdvantage ® cardmembers (on domestic American Airlines operated itineraries)
• AAdvantage Gold ® status
• oneworld ® Ruby

or when traveling to these destinations:

• El Salvador*
• New Zealand^
• South Korea^
• Transatlantic*

*Excluding Basic Economy

^Excluding Basic Economy for tickets issued on / after June 7, 2023

1st and 2nd checked bags are complimentary for:

• AAdvantage Platinum ® status
• one world ® Sapphire members
• Confirmed Domestic First customers
• Confirmed Business customers
• Confirmed Premium Economy customers

1st, 2nd and 3rd checked bags are complimentary for:

• Confirmed Flagship ® First and Flagship ® Business Plus customers*
• AAdvantage Executive Platinum ® status
• AAdvantage Platinum Pro ® status
• one world ® Emerald
• Active U.S. military and / or dependents with ID traveling on orders (1st - 5th bags free of charge)**
• Active U.S. military with ID on personal travel**

*Applicable only to Flagship ® First International, Flagship ® First Transcontinental and Flagship ® Business Plus. AAdvantage Executive Platinum ® status, AAdvantage Platinum Pro ® status and oneworld ® Emerald members traveling in Flagship ® First may check a 4th bag at no charge

**Free checked bags apply when traveling on American marketed and operated itineraries. Free checked bags don't apply to codeshare flights operated by our partners.

Save time, pay online

Don’t wait in line at the airport – get the best price available and check up to 3 bags when you check-in on aa.com or in the app.

Pay for your checked bags online within 24 hours of departure and receive the best price available for travel on domestic flights within and between the U.S., including Hawaii and Alaska, and select markets in the Caribbean and Central America.

For tickets issued on / after February 20, 2024, save $5 on the 1st checked bag fee for travel within and between the U.S., including Hawaii and Alaska, Puerto Rico and U.S. Virgin Islands.

For more information about paying for your bags online, visit our customer service FAQs.

Customer service FAQs

All published bag fees apply at each check-in location and are base rates according to travel dates and destination; applicable taxes are not shown.

All bag fees are non-refundable and apply per person, each way, even if you buy or get an upgrade that includes free checked bags. If you believe you were incorrectly charged for bag fees, contact an American representative for help or file a refund claim within 45 days.

^Main Plus includes 1 extra free checked bag in addition to the Main Cabin allowance (max of 2)

^^A $30 1st checked bag fee and a $40 2nd checked bag fee applies for tickets issued on / before February 19, 2024. A $40 1st checked bag fee ($35 if paid online) and a $45 2nd checked bag fee applies within / between the U.S. (including HI / AK), Puerto Rico and U.S. Virgin Islands for tickets issued on / after February 20, 2024. Otherwise, a $35 1st checked bag fee and a $45 2nd checked bag fee applies for tickets issued on / after February 20, 2024.

*Free bag excludes Basic Economy: For Basic Economy travel to / from Haiti, a $30 1st bag fee applies for tickets issued on / before February 19, 2024 and a $35 1st bag fee applies for tickets issued on / after February 20, 2024. For Basic Economy travel to/from Panama / Colombia / Ecuador / Peru a $45 1st bag fee applies. For Basic Economy travel to / from South America (excluding Colombia, Ecuador, Guyana, Peru, Suriname) a $45 1st bag fee applies for tickets issued on / before September 19, 2023 and a $60 1st bag fee applies for tickets issued on / after September 20, 2023. For Transatlantic Basic Economy travel, a $75 1st bag fee applies. For Transpacific Basic Economy travel for tickets issued on / after June 7, 2023 a $75 1st bag fee applies and for tickets issued on / before June 6, 2023 there is no 1st bag fee.

**For travel to / from Honduras, a $65 2nd bag fee applies seasonally for travel November 27, 2023 – January 10, 2024 for tickets issued on / before September 19, 2023 and for tickets issued on / after September 20, 2023 a $40 2nd bag fee applies year round. For travel to / from Panama and South America (except Guyana and Suriname), a $65 2nd bag fee applies for tickets issued on / before September 19, 2023 and a $100 2nd bag fee applies for tickets issued on / after September 20, 2023.

If your region isn’t listed, we can still help:

• Reservations and ticket changes

Through checked bags

We only through check bags if all your tickets are in the same reservation and you’re connecting to another American Airlines or one world ® flight.

Each passenger traveling to Cuba may only check up to 2 bags* with a maximum weight of 70 lbs / 32 kgs per bag, plus 1 carry-on bag and 1 personal item.

• Carry-on bags

*Seasonal exceptions apply to Havana, Cuba effective for travel on / after March 14, 2023

*For travel to Cuba, a $30 1st bag fee applies to Basic Economy and Main Cabin for tickets issued on / before September 19, 2023. For tickets issued on / after September 20, 2023 a $30 1st bag fee applies to Basic Economy and there is no 1st bag fee for Main Cabin. For tickets issued on / after February 20, 2024 a $35 1st bag fee applies to Basic Economy and there is no 1st bag fee for Main Cabin.

**For travel to Cuba, a $150 2nd bag fee applies for tickets issued on / after March 14, 2023 for travel on / before November 15, 2023 or travel on / after January 10, 2024. A $200 2nd bag fee applies otherwise. Excludes Main Plus for tickets issued on / after September 20, 2023.

^Main Plus includes 1 extra free checked bag in addition to the Main Cabin allowance (max of 2).

What else can you travel with?

• Mobility and medical devices
• Traveling with pets
• Special items and sports equipment

Restricted items

There are some items that are only allowed in checked bags or your carry-on. Check to see how to pack and travel with restricted items.

Flying on a partner airline?

Find helpful information if your trip includes 1 or more flights with our partner airlines.

• British Airways
• Japan Airlines
• Qatar Airways

You may also like...

• Paying for bags online

Thank you for signing up!

AI Summary to Minimize your effort

Transport Allowance for Salaried Employees - Meaning, Exemption, Calculation, Rules

Updated on : Mar 19th, 2024

11 min read

Transport Allowance is an allowance a company or employer provides to employees to compensate for their travel from their residence to the workplace. It is a type of special allowance. Like other allowances, transport allowance is a part of CTC and has fixed pay.

As the employee’s income tax computation is done by their employers for tax deduction purposes, salaried taxpayers may or may not be very concerned about their salary structuring and details of various kinds of allowances and exemptions available to them even before arriving at gross total income. However, understanding allowances and exemptions provided on such allowances is also significant for tax planning. This helps them choose the right CTC structure and lawfully claim the tax benefit to which they are entitled. Additionally the availability of the exemption depends on the tax regime chosen by the taxpayer.

This article will discuss one such allowance, i.e., transport allowance and its tax provisions.

What is Transport Allowance?

Transport allowance could mean allowance provided for the purpose of transport from residence to the place of work . 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 the transport business to meet his personal expenditure during his duty performed in the course of running such transport from one place to another place provided the employee is not in receipt of daily allowance

Transport allowance is taxable in the hands of the employee since it is added to their gross salaries. However, employees can claim tax exemption for transport allowance as per the exemption limit.

Quantum of Exemption

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

Changes by Finance Act, 2018

From the financial year 2018-2019, the tax exemption for medical and transport allowances has been merged. The Income Tax Department introduced a standard deduction in place of transport and medical allowance. From the financial year 2019-2020, the standard deduction is Rs 50,000, which covers the transport and medical allowance.  

Thus, employees can claim the deduction of Rs 50,000 while filing their ITR without producing any bills or documents. Employers will consider the standard deduction to compute the net taxable salary while calculating the TDS. This change shall take effect from the financial year 2018-19. Accordingly, no separate transport allowance of Rs 1,600 per month is available to employees other than physically challenged employees and employees of a transport business.   The limit of Rs 40,000 has been increased to Rs 50,000 in the Interim Budget 2019. Know the highlights of the Interim Budget 2019 here.

Difference Between Transport Allowance and Conveyance Allowance

A transport allowance is an allowance given to meet commuting expenses between the place of residence and office or to meet the personal expenditure of an employee of a transport business.

A conveyance allowance is an allowance granted to meet the expenditure on conveyance in the performance of office duty.

Transport allowance is fully taxable for all employees in both regimes. However it is exempt under both tax regimes to the extent of 3,200 per month for the employees who are physically challenged such as blind/deaf/dumb or orthopedically handicapped with disability of lower extremities. C onveyance allowance is exempt from tax only to the extent of actual expenditure incurred.

Illustration

Let us derive the taxable income of an employee for the FY 2017-18, FY 2018-19, FY 2019-20 and onwards.

Let us look the same illustration for an employee who is specially abled.

Transport Allowance Under the New Tax Regime 

From the FY 2020-21, the government introduced the new tax regime for individual and HUF taxpayers under section 115BAC. In the new tax regime, there are flat tax rates and no deductions or exemptions. For example, an individual opting for the new tax regime cannot claim exemptions for HRA and others. Also, the individual cannot claim deductions for any tax-saving investments. However, the new tax regime allows an individual to claim the following tax-exempt allowances:

• Allowance by the employer to meet the cost of travel on tour or transfer. It includes an allowance towards the cost of travel, such as airfare, rail fare and other transportation costs.
• Any allowance by the employer to meet the ordinary daily charges incurred by an employee on account of absence from the usual place of duty. The allowance should be in respect of the tour or for the period of the journey in connection with a transfer. The allowance includes expenses an employee incurs for food and other daily costs while travelling.  
• Allowance to meet conveyance expense incurred while performing duties of an office or employment of profit. However, in this case, the employer should not provide a free conveyance to the employee. The allowance includes travelling expenses an employee incurs while performing official duties.

In the case of an employee who is blind, deaf and dumb, or orthopedically handicapped, with a disability of lower extremities can claim transport allowance to meet expenditure on commuting between residence and the place of duty. The benefit is up to Rs 3,200 per month. The same would be fully taxable in the case of an employee with no disabilities.

How to Claim Transport Allowance While Filing Income Tax Return for an employee who is specially abled ?

Usually, employers take care of the tax exemption on transport allowance while deducting TDS from the paycheck. In such cases, employees have to enter the amount mentioned in Form 16 part B in the ‘Income from Salary’ column of their ITR Form .

But when an employer has given a tax benefit on transport allowance or forgotten to give the tax benefit in Form 16 , you can claim tax exemption by following the below process:

• Check the CTC structure from the salary slip.
• Check whether the amount of transport allowance is part of the CTC.
• If the amount in the CTC structure is less than Rs 3,200 per month, the entire travel allowance would be tax-free.
• If the amount in the CTC structure is more than Rs 3,200 per month, the tax-free amount would only be Rs 3,200 per month.  

Related Articles

Income tax allowances and deductions Special allowance taxation Allowances and deductions available to a salaried

Frequently Asked Questions

A normal employee (other than a handicapped employee) cannot claim transport allowance for commuting between residence and place of work or employment.

The standard deduction is a flat deduction available from the taxable salary or pension income. The deduction amount is Rs. 40,000 for FY 2018-19, whereas it is increased to Rs.50,000 from FY 2019-20 and onwards.

You can furnish the proof or invoices of relocation expenses to your employer and claim tax-free reimbursement.

The tax exemption for medical reimbursement is no longer applicable. From the FY 2018-19, the fixed medical reimbursement and transport allowance stand replaced by a standard deduction.

No, if there is a company-run transportation service facility, they will not pay you a conveyance allowance whether you use the service or not. 

No, your employer can pay whatever amount they find appropriate. However, only specially abled employees can avail the exemption against such allowances.

An employee who is handicapped can get the exemption of transport allowance up to Rs. 3,200 per month.

Yes, a handicapped employee can get an exemption of up to 3,200 per month if he pays taxes in any of the regime.

No, transport allowance is fully taxable in the case of a normal employee if he pays taxes in any regime.

70% of such allowance up to a maximum of Rs.10,000 per month will be exempted if he has not received daily allowance. Suppose If he receives a daily allowance, then he would not be eligible for this exemption.

Quick Summary

Was this summary helpful.

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company Policy Terms of use

Data Center

SSL Certified Site

128-bit encryption