Leave Travel Concession or Assistance, section 10(5) & Rule 2B

General Provision

In some cases, the employer may provide leave travel concession or assistance to his employee to go on leave to any place in India either alone or along with his family. The employee is entitled to exemption under section 10(5) in respect of the value of leave travel concession or assistance received by him from his employer.

Family for the leave travel concession includes: Spouse of employee; Children of the employee (minor or major, dependent or independent, married or unmarried); and parents, brothers and sisters of the employee provided they are dependent on him.

No exemption is allowed for the third or subsequent child who is born on or after October 1st 1998. This rule shall not be applicable in the case of multiple birth.

Quantum of Exemption

Exemption shall be least of the following:

A) Actual expenditure incurred on the performance of journey; or

B) Amount determined as per given below;

1)   If journey is performed by air, extent of maximum exemption available is equal to economy fare charged by a National Carrier for the shortest route to the place of destination.

2) If journey is performed by any mode of transport other than air then:

Case 1; If Places of origin of journey and destination are connected by rail then extent of maximum exemption available is First class AC fare charged by the Indian Railway for the shortest route to the place of destination.

Case 2; If Place of origin of journey and destination are not connected by rail then extent of maximum exemption available are as follows:

a) if recognized public transport system exit then First class or deluxe class fare charged by such recognized public transport system for the shortest route to the place of destination.

b) if recognized public transport system does not exit then Amount equivalent to the first class AC fare that would have been charged by the Indian Railways for the shortest route to the place of destination if a railway connection existed between such places.

Notes:

If Leave Travel Concession is encashed without performing  the journey, the entire amount received by the employee would be taxable. The above exemption is allowed only in respect of travelling expenses. Expenses on boarding, lodging, conveyance from residence to the railway station/ airport/ bus stand and back and other expenses incurred during the journey will not qualify for exemption.

The assessee can claim exemption in respect of any two journeys in a block of 4 years. If the assessee has not availed Leave Travel Concession exemption in a particular block, maximum one journey can be carried forward and such carried forward journey should be under taken 1st year of the next block. Such carried forward journey shall not taken into account for determining the tax exemption of two journeys for the next block.