The Income Tax Act 1961 provides certain exemption from salaries apart from deduction from Chapter VI A. Exemptions refers to certain part of salary is not considered as a income while calculating taxable Income. Deductions means a certain amount of saving or Expenditure for Specific reason is allowed to deduct from your Gross Taxable Income.

Leave Travel Allowance or Concession is one of those Available Exemption given to Salaried Assessee from his Total taxable income as per Section 10 subsection 5 of Income Tax Act 1961. As the name itself leave travel Allowance refer an amount received by employee from his employer for leave proceeding to any place in India either on leave, after retirement of service or termination from his Service. The Benefit is Available to individuals Residents as well as non- residents in respect of leave concession for himself / herself or family. Family Includes Spouse children of individual parents and brothers and Sisters dependent upon him/her.

Government has recently made an announcement vide notification F.No. 12(2)/2020-EII(A) Ministry of Finance Department of Expenditure EII(A), that all non-central government employees would be eligible for exemption subject to maximum Rs. 36,000/- per person without producing travel bills.

Certain conditions to be met for claiming Leave travel allowance as exemptions. The conditions are as follows

  •  Actual Journey is must for concession
  • Only domestic travel is considered no International travel is available for concession.
  • The exemption shall not be available to more than two surviving children of an Individual after 01.10.1998. these restrictive sub-rule shall not available in case of children born before 01.10.1998 or in case of multiple births after first child.
  • Under Rule 2B, exemption will be available only in respect of two Journeys in block of four calendar years which start from the year 1986. **

** Where such leave travel concession is not availed by employee in any block of four years, one such LTC will be carried forward immediately next block of four calendar year.

Monetary Limit

Where the journey is performed after 01.10.1997 the amount of LTC is exempted under section 10(5) in respect of value of LTC received or Actual Amount spend on travel subject to certain conditions:

1. Air Travel

Amount not exceeding the air economy fair of national carrier by the shortest available route to the place from destination.

2. Any other mode

i.) When rail service is Available

Amount not exceeding the air conditioned first class rail fair by shortest route.

ii.) When rail service is not available

a) A recognised public transport facility exist

Amount not Exceeding the first or deluxe class fair of such transport.

b) No recognised public transport facility exist

Amount equal to first class railway fair available by shortest route.

Example If LTA granted by employer is Rs 50,000 and actual eligible travel cost incurred by employee is Rs 30,000, exemption is available only to the extent of Rs 20,000 and balance Rs 20,000 would be included in taxable salary income.

Procedure to Claim LTC

Procedure to claim LTC is generally Organisation specific. Every Organisation announces the due date within which LTC can be claimed by the employees and may require employees to submit proofs of travel such as tickets, invoice copies or expenditure voucher provided by travel agent etc. along with the mandatory declaration.

Though it is not mandatory for employers to collect proof of travel, it can be asked by organisation to submit the records of travel as per LTC policy of the company/to tax authorities on demand.

*** Value of leave travel concession provided to high court judge or Supreme Court judge and his family members are completely exempt from tax without any condition.

Some other conditions of to be kept in mind to avail the exemption under notification F.No. 12(2)/2020-EII(A) dated 12the October 2020.

1) The employee spends the money of a larger sum than the entitlement on account of LTC on actual expenditure

2) Cash equivalent of full leave encashment will be allowed, provided the employee spends an equal sum.

3) The cash equivalent may be allowed if the employee spends a sum 3 times of the value of the fare given above. Employee who spends less than 3 times the fare amount will get proportionate income tax exemption. The purchase have to be made from 12.10.2020 to 31.3.20.21. purchasing of goods or service to be made by registered vendor of GST and GST is lavied 12% or more on Purchase made. E.g. suppose if the LTC fare is Rs 10,000, and is claimed for a family of four, then the employee would get Rs 40,000 (20,000 x

4). The amount that the employee will have to spend would be Rs 1,20,000 (Rs 40,000 x 3). However, if the employee ends up spending only Rs 96,000, the person would get tax exemption of Rs 32,000 only (80% of 40,000).

5) The Concession is not available to an employee who has exercised an option to pay income tax under new income tax / concessional tax regim.

Author Bio

Qualification: CA in Job / Business
Company: https://youtu.be/01JkaZyWwXQ
Location: Kalyan, Maharashtra, India
Member Since: 07 May 2020 | Total Posts: 39
A Qualified Chartered Accountant having 4 Years of Post Qualification Experience in Individual Taxation & Indirect Taxation. Services provided - Income tax Filing / Planning , GST & TDS returns filing-related updates. You can reach out to me on 8879882025 (call or Whatsapp) or an email View Full Profile

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3 Comments

  1. Nikhila Kanaparthi says:

    All conditions laid under 2BA of 10(5) are fulfilled in my case and GST paid is 18%. But my Auditor is refusing to claim this benefit saying that it is not mentioned in my F 16 issued by my employer.

  2. T VENKATA VISWESWARA RAO says:

    I am a central government employee and purchased a car costs around Rs.7.5 lacs with LTC voucher of Rs.60,000 and leave encashment of Rs.40000/-.Am I eligible for exemption of both in IT return.
    With regards
    T V V RAO

  3. Rajesh says:

    I am PSU employee , have availed LTC in 2020-19 by traveling to destination and LTC claim of Rs 67298 is settled in 2020-21and included in F16 B form by department as travel concession or assistance under section 10(5).
    Whether I will get exemption of full amount of Rs 67298 or amount i.e. Rs 36000 as explained in this article ?

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