Government in Budget 2021 notified Leave Travel Concession (LTC) cash Voucher scheme. In view of the situation arising out of outbreak of COVID pandemic, it is proposed to provide tax exemption to cash allowance in lieu of LTC.

Initially, the scheme was announced in October 2020 for Central Government Employees and later via a press release, the scheme was extended to private sector, PSU and state government employees also.

In order to provide relief to employees, it is proposed to insert second proviso in clause 5 of section 10, so as to provide tax exemption to the amount given to an employee in lieu of LTC subject to incurring of specified expenditure. This amendment will take effect from 1st April, 2021 and will, apply in relation to the assessment year 2021-2022 only.

It is also proposed to clarify by way of an Explanation that where an individual claims and is allowed exemption under the second proviso in connection with prescribed expenditure, no exemption shall be allowed under this clause in respect of same prescribed expenditure to any other individual.”

To claim the benefit under the scheme, an individual is required to fulfill the following conditions:

claim the benefit

Note: The employee who has exercised an option to pay tax under concessional tax regime under section 115BAC of Income tax Act, 1961 shall not be entailed for the above exemption.

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Qualification: CA in Practice
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CA Ajay Naval, Partner at VDA & Associates, Pune View Full Profile

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April 2021