How Do You Calculate Local Conveyance Reimbursement Rates for 2-Wheelers and 4-Wheelers?

Calculating Local Conveyance Reimbursement Rates

I want to know how to calculate the local conveyance reimbursement rate (per km) for 2-wheelers and 4-wheelers as petrol prices keep fluctuating. I would appreciate it if anyone could share their policy and formula for calculating the reimbursement rate.

Regards,
Dinesh

Dear Dinesh, actually, there is no formula for calculating conveyance allowance. If any person goes out for company purposes, they may receive payment based on kilometers traveled, such as a fixed amount per kilometer, for example, 2 Rs per kilometer or 3 Rs per kilometer. It totally depends on the company's policy.

Your accounts can help you in formulating a formula.

Broad Guideline for Reimbursement Calculation

I am giving a broad guideline which is normally used in arriving at reimbursement:

1. Consider petrol and oil price as Rs 70 per litre on average for the year.

2. Two-wheelers mostly give 50 km on average per litre of fuel (it could be more or less, and this is just an example).

3. Hence, fuel expenses will be Rs 1.40 per km usage.

4. Assume the cost of a two-wheeler as Rs 80,000 and 10% depreciation will mean Rs 8,000 per year.

5. Let us assume that a bike is used for about 100 km a day, which will mean approximately 2,500 km a month for 25 days and 30,000 km a year.

6. Divide depreciation of Rs 8,000 by usage km per year, i.e., 30,000 km. This will mean 0.27 paisa per km.

7. The total reimbursement hence is Rs 1.67 paisa per km (Fuel cost + Depreciation).

8. Some also include finance charges with an assumption that 50% will be used for personal and 50% for official purposes (Fuel cost + Depreciation + Finance charges).

Most established organizations have a very well-laid-out procedure for calculating and revising such reimbursements. This is not done without any basis.

Regards,
Sivasankaran