The daily commutation allowance, also known as conveyance allowance, is generally not considered as part of the basic salary and hence, it is not subject to PF/ESIC deductions. However, it is important to note that this rule is applicable only if the allowance does not exceed Rs. 1600 per month, as per the Income Tax Act.
In your case, since the allowance is given on the basis of days attended and varies accordingly, it is crucial to ensure that it does not exceed the limit set by the Income Tax Act. If it does, it will be considered as part of the salary and will attract PF/ESIC.
Moreover, it is advisable to maintain a separate head for this allowance in the salary structure to avoid any confusion. This will make it clear that the allowance is not part of the basic salary and hence, not subject to PF/ESIC.
Lastly, while you mentioned that producing bills is not feasible, it is still important to maintain some form of documentation or record for this allowance. This could be in the form of a signed declaration from the employees stating their travel expenses. This will serve as a proof and can be helpful in case of any audits or inspections.
Please consult with a labor law expert or a chartered accountant to ensure compliance with all the rules and regulations.