The amount exempt under section 10(5) for LTA/LTC is the value of any travel concession or assistance received or due to the assessee from his employer for himself and his family in connection with his proceedings on leave to any place in India.

Exemption is available in respect of only two journeys performed in a block of four Calendar years is commencing from 1986. The current block of four years is 2018-2021 ( i.e, 1st Jan 2018 to 31st Dec 2021)

The quantum of exemption is limited to the actual expenses incurred on the journey. In other words, without performing any journey and incurring expenses thereon, no exemption can be claimed .

The exemption is strictly limited to expenses on air fare, rail fare, and bus fare only. No other expenses like scooter / taxi at both ends, porterage expenses during the journey and lodging/boarding expenses will qualify for exemption

It is the onus of employer to keep custody of the supporting with respect to the claim by employee for leave travel concession. But as per the recent decision of the Supreme Court rendered in the case of Larsen & Toubro , it was held by the Supreme Court that the employer need not collect any supporting with respect to LTC/LTA while computing the quantum of tax deducted at source while computing the same.

However  Finance Act 2015 introduced a new section 192(2D) which came after Supreme Court decision, by virtue of which the person responsible for making the payment of salary  are obliged to collect the necessary evidence or proof in the prescribed form and manner to allow any claim for any deduction and/or tax. The Central Board of Direct Taxes (CBDT) has  prescribed the form i.e. Form 12BB, in which salaried employees would now require to furnish evidence of claims and tax saving investments to the employer.

So the employer is obliged to maintain all supporting documents as proof of spending the amount which will be required to be submitted by the employee to the Employer.

An employee will have to give a declaration to the Employer in the prescribed form that he has spent the amount paid by the employer as LTA which will be relied by the Employer while computing the tax to be deducted at source. It is clarified that the Employer will be held responsible and it is the Employees responsibility to submit genuine declaration to the Income Tax department / company and also maintain the supporting for the Travel.

(Republished with Amendments)

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  1. Rakesh says:

    i had submitted claimed for LTA exemption by submitting all necessary proofs to my employer.
    the same is also reflected in my Form 16.

    While filing ITR under which section should i declare theses?

  2. Vishal Jain says:

    I think its wrong bcaz,

    The court in its order said: “The beneficiary of exemption under Section 10(5) (of the Income Tax Act) is an individual employee. There is no circular of Central Board of Direct Taxes (CBDT) requiring the employer under Section 192 to collect and examine the supporting evidence to the declaration to be submitted by an employee(s).

    And CBDT also release the circular no. 8/2012 [F.NO. 275/192/2012-IT(B)], DATED 5-10-2012

    Obligation of the employer -the employer has to satisfy the obligation that leave travel (fare) concession is not taxable in view of section 10(5), the employer is not only required to be satisfied about the ingredients of the said clause but also to keep and preserve evidence in support thereof.

    Please Confirm.

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January 2021