Finance Act, 2018 introduced standard deduction of Rs 40,000 in lieu of transport allowance of Rs 1600 per month and also a medical allowance of Rs 15,000. This change shall take effect from the financial year 2018-19 and 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.
However, it may be noted that the Transport Allowance upto Rs. 3,200 pm shall continue to be exempt in the case of an employee, who is blind or deaf and dumb or orthopaedically handicapped with disability of lower extremities.