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 whereby a salaried employee can claim tax exemption merely on purchase of certain goods or services by the employee or their family members.
- 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). It is very important to note that that employee can also claim this exemption on purchases made by any family member of the employee.
- 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.
Effect of this Tax Exemption on Income tax liability of a salaried person:
Example: If a salaried person or his / her family member purchases a mobile or AC of Rs. 45,000. An amount of Rs. 15,000 (1/3rd of Rs. 45,000) will be reduced from their total income. Accordingly, income tax will be payable on such reduced income.
To claim the above exemption – The Employee may intimate the Employer about the details of specified expenditures (i.e. on which GST Rate is 12% or more) along with supporting vouchers. The employer will accordingly deduct lower TDS after considering this exemption. If the employee does not 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 1 : You can also claim deduction if you or your family members have purchased TV/Computer/AC/Car/Mobile, etc. between 12th October, 2020 to 31st March, 2021 subject to fulfilment of the above conditions.
Example 2 : A salaried person can also claim deduction in respect of coaching fees paid for his / her children subject to fulfilment of the above conditions.
Example 3 : A salaried person purchases Computer/Laptop of Rs. 75,000 + GST @18%. i.e. Rs. 88,500 (inclusive of GST). Amount of Rs. 29,500 (being 1/3rd of Rs. 88,500) can be claimed as exempt. Thus, the total income will be reduced by Rs. 29,500 and income tax will be payable on such reduced income.
(Republished with Amendments)
Author Bio
SIR I WENT TO LTC FROM 24-10-2021 TO 26-10-2021 AND RECEIVED THE RAIL FAIRE FROM MY EMPLOYER NAD WE RECEIVED THE 10 DAYS SALARY AFTER PERFORMING THE LTC . CAN THIS 10 DAYS SALARY IS EXEMPTED FROM INCOMETAX. PLEASE CLARIFY THE SAME .
i purchase a bike on 30 march 2021
can i claim LTC for it
In respect of special LTC, Leave encashment for 10 days is taxable
sir,
i have availed Rs.36000/- in lieu of LTC cash voucher scheme can i get exemption from income tax or not please let me know.
I have not submitted bills to my employer as they were not accepting bills for LTC. So, LTC is not included as salary component in this financial year. Can I still avail LTC exemption on GST Purchases made by mentioning it in ITR?
Usually my company gives LTA after we submit bills, if not then LTA is not included in salary. Can I claim deduction in salary without LTA as salary component?
The explanation is very clear. But I want a clarification in case, if two members availed normal journey on LTC in may & two other members availed cash allowance of Rs. 40000/ on purchase of goods of value more than 1lakh 20 thousands having gst @ 18%[ more than 12%]. Whether Rs. 40000+ actual fare paid in LTC is exempted or only Rs40000/ is exempted? Please reply.
I had purchased TV on 19th Oct 2020 and bill is on my father’s name. I was not aware of this LTC voucher scheme until last month and failed to submit my request with my employer. Now, I am going to mention it as LTA in ITR and my question is where can I submit my bill receipt now?
I spent as rent for marriage Hall for my daughter marriage? Is it allowed?
Sir I have bought a car and payment was done on 8 Oct 2020. Can i get benefit of this scheme.
Travel happened between 30/3/2021 and 8/4/2021, so whether LTA exemption can be claimed in for FY 2020-21 or it will go in next financial year
Can i avail this refund while i have not paid ltc by gov. Although i am a aided college teacher
Sir, Would like to know that whether this is applicable when we purchase only 1 product or it is applicable on purchase of multiple products during the period (12th October, 2020 to 31st March, 2021) and on multiple dates.
Thankyou so much for the information
Sir, is the said exemption available for those who opted the new tax regime wherein no deductions / exemption would be taken into account but with a different / lower tax slab? Further, it may also be clarified, in case of old tax slab, is this exemption available in addition to the reimbursement of 1/3 of the amount spent, received on submission of the GST bills?
What about the exemption, will it include the gst paid on purchase of goods or rendering of services or only taxable amount.
Yes. You can also claim deduction of GST amount as well. Kindly refer example 3.
Example : A salaried person purchases Computer/Laptop of Rs. 75,000 + GST @18%. i.e. Rs. 88,500 (inclusive of GST). Amount of Rs. 29,500 (being 1/3rd of Rs. 88,500) can be claimed as exempt. Thus, the total income will be reduced by Rs. 29,500 and income tax will be payable on such reduced income.
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 ?
Yes. If you incur Rs. 3,24,000 in a family of 3 members, you can claim deduction of Rs. 1,08,000. i.e. Rs. 1,08,000 (i.e. Rs. 36,000 per member for 3 family members) will be reduced from your total income and tax will be payable on such reduced Income. i.e. your income tax liability will be reduced by Rs. 32,400 @ tax rate of 30% (30% of 1,08,000).
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.
This exemption is available for Financial year 2020-21. The expense should be incurred from 12th October, 2020 to 31st March, 2021. So yes, the March 2021 bills would be covered for claiming this exemption. If goods purchased without GST, this exemption will not be available. The condition is that the purchase of good or service should be GST paid @ 12% or more.
I have purchase the goods within the defined timeline but forgot to submit document to my employer due to non averseness and now Form 16 has been generated and employer not accept the document
So, can i get this benefit while filling ITR?
What about self employed who work at home.Is LTC deductions allowed. Only good must be purchased without GST.
A self employed person means a businessman. A businessman cannot claim this exemption. If from a self employed person working at home – you mean a salaried person / an employee, who is working at home. Yes, this deduction can be claimed even for work from home. However, If goods are purchased without GST, this exemption will not be available. To claim this exemption, condition is that the purchase of good or service should be GST paid @ 12% or more.
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.
This exemption is available under section 10(5) of the Income Tax Act, 1961. Further, amount of exemption is 1/3rd of the amount spent on purchase of goods or services where GST rate of 12% or more is charged are eligible for claiming this deduction. So, if you spend Rs. 1,08,000, you can claim exemption of Rs. 36,000 (i.e. 1/3rd of Rs. 1,08,000). Further, the maximum amount of this exemption is also Rs. 36,000/- per family member.
can we take LTC for Leh-Ladakh during covid-19 pandemic for July 21 is now unlocked
The expenditure should have been incurred between 12th October, 2020 to 31st March, 2021. Then only LTC Cash incentive can be claimed in the return of income for the Assessment year 2021-22 (FY 2020-21).
What about pensioners of PSU or Govt. Employee on LTC.Please Comment on it.
A pensioner generally does not has LTC component component in their pension. LTC exemption can only be claimed if the salary / pension contains component of LTC. Thus, since generally pension does not contains LTC / LTA component, this exemption will not be available in case of pensioners.
Very nicely explained the provisions
Thank you very much Sir.