Mukesh Patel.in
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TAX HOLIDAY FOR LEAVE TRAVEL CONCESSION

Get LTC from your Employer and Enjoy Family Vacation with Tax Exemption

One of the important tax free perquisites available to salaried employees is ‘Leave Travel Concession’ (LTC) or ‘Leave Travel Assistance’ (LTA) which is treated as exempt under Section 10(5) of the Income-tax Act read with Rule 2B of the Income-tax Rules.

Under Section 10(5), the value of any travel concession or assistance received or due to the employee from his employer is treated as exempt in the following two cases:

  • Amount received in connection with the proceeding on leave by the employee and his family to any place in India.
  • Amount received in connection with the proceeding to any place in India by the employee and his family, after retirement or termination of his service.

For the purpose of Section 10(5), family in relation to an individual means:

  • The spouse and children of the individual; and
  • The parents, brothers and sisters of the individual, who are wholly and mainly dependent on him.

In respect of any journey performed after 1st October, 1998, the exemption will be admissible to all surviving children of the employee born before this date. However, in case of children born on or after 1st October, 1998, the exemption will be admissible to only two surviving children and in reckoning the limit of two, children born out of multiple birth after the first child will be treated as one child only. This amendment has been made with a view to encourage prospective family planning amongst employees.

TWO TRAVELS IN FOUR YEARS EXEMPT

Exemption of LTC/LTA is available in respect of two journeys performed in a block of four years commencing from 1986. Accordingly the current block is for the calendar years 2010-2013. It has been further provided that if an employee has not availed the benefit of LTC or LTA during any specific four year block period on either one or both of the permitted occasions, exemption can be claimed in the first calendar year of the next block, but in respect of only one additional journey. This is known as ‘carry over concession.’ In such cases, exemption so availed will not be counted for the purpose of claiming the future exemption available in respect of two journeys in the next block.

Illustration: For the block of 2006-09, Mr. P availed LTC/LTA exemption only once or did not avail any exemption at all. In such circumstances, he would be eligible to the benefit of the carry over concession. Accordingly, Mr. P could claim the benefit of LTC or LTA exemption in 2010 (being the first of the next block). In addition to the same, he can also avail exemption on two more occasions during the block 2010-13.

IMPORTANT CONDITIONS FOR EXEMPTION

The following important conditions for availing exemption in regard to LTC/LTA should be borne in mind:

  • The quantum of exemption is limited to the actual expenses incurred on the journey.
  • Scope of the journey would include only actual travel expenditure i.e. expenses on air, rail or road fare and not for any lodging or boarding expenses. Moreover, no exemption can be claimed without performing actual journey after taking leave and incurring actual travel expenditure.
  • Where the journey is performed by a circuitous route, exemption is limited to what is admissible for the journey from the place of origin to the farthest point reached, by the shortest route.

Quantum of exemption of LTC/LTA is as under:

  • Where the journey is performed by air, the amount of economy class fare of the national carrier.
  • Where the journey is performed by rail, amount of air-conditioned first class rail fare.
  • Where the place of origin of journey and the destination (or part thereof) are not connected by rail, the first class or deluxe class fare. However, where no recognized public transport system exists, air-conditioned first class rail fair (as if journey has been performed by rail).

 


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