Income Tax Exemption of Rs. 36,000 per family member to a Salaried person for the Financial year 2020-2021 (also available to Private Sector Employees)

Many Salaried employees get Leave Travel Concession (LTC) from their Employers which is exempt to the extent it is actually spent on travelling. LTC which could not be spent is taxable in the hands of employee. However, in view of the COVID-19 pandemic and resultant nationwide lockdown, many employees were not able to travel and were thus not able to avail the benefit of LTC for the FY 2020-2021.

Thus, the Government has provided for Income tax exemption on account of value in lieu of Leave Travel Concession.

  • Amount of Exemption: 1/3rd of amount spent on purchase of goods or services from GST Registered vendors / service providers on which GST Rate is 12% or more (i.e. 12% or 18% or 28%).
  • Maximum amount of exemption: 36,000 per family member. (Eg. If 3 members in family – then Exemption of Rs. 1,08,000)
  • Expense / Purchase should have been made between 12th October, 2020 to 31st March, 2021.
  • Payment should be made through digital mode. (i.e. it should not be in cash)
  • The employee exercises an option for the deemed LTC fare in lieu of the applicable LTC in the Block year 2018-21.
  • Employee should obtain GST invoice from the vendor / service provider.
  • Family Member means spouse and children of the individual. Family also includes parents / brother / sister dependent on the individual.

To claim the above exemption – The Employee should intimate the Employer about the details of specified expenditures (i.e. on which GST Rate is 12% or more) alongwith supporting vouchers. The employer will accordingly deduct lower TDS after considering this exemption. If the employee is unable to intimate the employer, he/she can claim the exemption while filing their income tax return for the Financial year 2020-21 (Assessment year 2021-22)

Note: If an employee opts for new tax regime u/s. 115BAC of the Income Tax Act, then such employee would not be eligible to claim the above exemption of LTC Cash Scheme.

Example: You can also claim deduction if you have purchased TV/Computer/AC/Car/Mobile, etc. between 12th October, 2020 to 31st March, 2021 subject to fulfilment of above conditions.

I hope you find this useful.

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7 Comments

  1. Jigyasu says:

    What about the exemption, will it include the gst paid on purchase of goods or rendering of services or only taxable amount.

  2. Hemant says:

    it is direct tax benefit or it will reduce the taxable income to eligible amount ? Let say family of 3 person incurred 3,24,000 to get max benefit 1,08,000 then 1,08,000 is tax benefit or 1,08,000 will deducted from taxable income and then tax calculate based on slab?

    if above is yes then is it correct if you speed 3,24,000 you will get tax benefit of 32,400 Max(30% of 1,08,000)
    please clarify ?

  3. Jaya says:

    Sir, please confirm March 21 bills can be submitted in June 2021 as LTA block ends only in Dec 2021. In this case associate will get tax exemption for April and May accumulation as well. Please advsie.

  4. Gurdev Singh says:

    Sir, I want to know that under which section I can the Exemption: 1/3rd of amount spent on purchase of goods or services in ITR. I availed amount of Rs. 54000/- (LTC fare Rs. 36000/- + 10 days Leave encashment Rs. 18000/-) in lieu of Leave Travel Concession. As per the rule I have to spent 3 time of LTC fare i.e. Rs. 108000/-. How much i get the exemption. Intimate please.

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