Salaried taxpayers may have less kitty for holidays from April 2012, with the government proposing to scrap tax incentives on leave travel allowance in the new direct tax regime DTC. The Direct Taxes Code (DTC) bill, which was tabled in the Lok Sabha yesterday, seeks to do away with leave travel concession (LTC) from its list of exemption. “LTC was one of the popular elements given to employees by the government.
Taxpayers will not be too happy, as already there aren”t many benefits for them in DTC. It may also be a dampener for the travel industry, which may see less people willing to travel and holiday,” Ernst & Young Tax Partner Vishal Malhotra said. DTC aims to replace the archaic Income Tax Act and other direct taxes legislation like Wealth Tax Act, from April 1, 2012.
It proposes, among other things, to remove a plethora of exemptions and effect changes in income tax slabs. While DTC proposes to retain exemptions such as house rent allowance and leave encashment, it seeks to remove LTC from the list.
The exemption limit for medical reimbursements, however, is sought to be increased. The Government has also proposed only a marginal raise in income tax exemption for investment in approved funds, insurance schemes and tuition fee to Rs 1.5 lakh in a year, from Rs 1.2 lakh currently.
It seeks to provide income tax exemption on investment of up to Rs 1 lakh in approved funds. Besides, it proposes to provide exemption of up to Rs 50,000 on investments made in insurance, including health cover, and tuition fee.
Currently, investment up to Rs 1 lakh in approved funds and insurance schemes is exempt from income tax. For this fiscal, investment up to Rs 20,000 in infrastructure bonds have also been given this benefit.
The exemptions proposed in the DTC bill are much lower than Rs 3 lakh suggested in the first draft. This is so because the bill proposes to retain Income Tax exemption on interest up to Rs 1.5 lakh a year paid on housing loan, tax experts said.
The first draft was silent on exemption for interest paid on housing loans. However, after adverse feedback from various quarter, the second draft proposed to retain this exemption, which is also incorporated in the bill.
yes that is correct. so no need to worry as far as LTA is cncerned
Dear Team
The confusion over LTA is removed, as clarified the intial list of exemptions did not include LTA for salaried employees, but the same has been clarified to continue, however like other allowances the same needs to be added to the salary income and then allowed for exemption unlike earlier where it was not mentioned in the Form 16A / Payslip, etc.
Please update accordingly.
Regards
Sumesh Balakrishnan
A senior finance ministry official,who was involved with the framing of the DTC has clarified that the LTA would enjoy tax exemption. LTA would first have to be accounted in the total income and then claim deduction of the amount eligible.
The directive to this extent will figure in the rules to be framed by the finance ministry.