You are currently viewing All About Leave Travel Concession Section (LTC/LTA) 10(5) of Income Tax Act

All About Leave Travel Concession Section (LTC/LTA) 10(5) of Income Tax Act

In addition to the deduction from Chapter VI A, the Income Tax Act of 1961 grants certain salary exemptions, which mean that certain portions of a salary are excluded from the calculation of taxable income. Derivations implies a specific measure of saving or Consumption for Explicit explanation is permitted to deduct from your Gross Available Pay.

All About Leave Travel Concession Section (LTC/LTA) 10(5) of Income Tax Act,1961 Remittance or Concession is one of those Accessible Exception given to Salaried Assessee from his Absolute available pay according to Area 10 subsection 5 of Personal Expense Act 1961. The term “leave travel allowance” refers to a payment that an employee receives from his employer in exchange for traveling to any location in India while on leave, after retirement, or upon termination from his employment. The Advantage is Accessible to people Occupants as well as non-inhabitants in regard of leave concession for himself/herself or family. Family members include the spouse, children of individual parents, and siblings who are dependent on that person.

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.

For Leave travel allowance to be claimed as an exemption, certain requirements must be met. The following are the requirements: Actual travel is required for concession; only domestic travel is considered; no international travel is permitted. The exclusion will not be accessible to in excess of two enduring offspring of a Person after 01.10.1998. These restrictive subrules won’t apply to children born before October 1, 1998, or to multiple births after the first. Exemption will only be granted in accordance with Rule 2B for two Journeys within a block of four calendar years beginning in 1986.

Leave Travel Concession Section (LTC/LTA) 10(5) of Income Tax Act, 1961

Where such leave travel concession isn’t profited by representative in that frame of mind of four years, one such LTC will be conveyed forward quickly next block of four schedule year.

  • Monetary Limit

Section 10(5) exempts the value of LTC received or the Actual Amount spent on travel for trips completed after January 1, 1999, subject to the following conditions:

  1. Travel by air in a quantity that does not exceed the national carrier’s fair air fare on the shortest route to the destination.
  2. Some other mode

I.) When rail administration is Free Sum not surpassing the cooled five star rail fair by most limited course.

 ii.) a) There is a recognized public transportation facility that does not exceed the first or deluxe class fair of such transportation when rail service is unavailable.

  1. b) There is no officially recognized public transportation option that offers a level of service comparable to a first-class rail pass on the shortest route.

For instance, if an employee receives LTA of Rs 50,000 from their employer and incurs Rs 30,000 in actual eligible travel expenses, only Rs 20,000 will be exempt, and the remaining Rs 20,000 will be included in taxable salary income.Leave Travel Concession Section (LTC/LTA) 10(5) of Income Tax Act, 1961

  • Procedure to Claim LTC

The process for claiming LTC varies from organization to organization. Employees may be required to submit proofs of travel, such as tickets, invoice copies, or expenditure vouchers provided by a travel agent, among other things, by the organization’s deadline for LTC claims. in addition to the obligatory declaration.

Although employers are not required to collect proof of travel, they may be asked to do so in accordance with the company’s LTC policy or upon request from tax authorities.

The value of the leave travel concession granted to a judge on the Supreme Court or High Court, as well as the members of his or her family, is completely and unconditionally exempt from taxation.

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 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). 

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.

FAQs of Leave Travel Concession Section (LTC/LTA) 10(5) of Income Tax Act, 1961

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.

Leave Travel Allowance or LTA is a type of allowance given to the employee by employers for travel. It covers within-country travel costs when he/she is on leave from work. Section 10(5) of the Income Tax Act, 1961 with Rule 2B ensures the exemption of tax and also details the conditions subject to tax exemption.

It is also limited to the LTA provided by the employer. For eg: If the actual expense incurred is INR 50,000 but LTA as part of Salary is INR 35,000 then the maximum exemption available would be INR 35,000 only.

Since the LTA is a component of your salary structure itself, it gets credited to your account as part of your salary on a regular basis. However, if you don’t travel at all or don’t have valid proof of travel, then you can not claim the LTA received for tax exemption purpose.

Owner of this information can be reached at K M GATECHA & CO LLP.

Important note: This does not lead to legal advice or legal opinion and is personal view and for information purpose only. It is prepared on  the basis of facts available and applicable law.It is suggested to go through applicable provisions of law,latest regulations,judicial announcements, circulars, notifications and clarifications  etc before taking any action based on above content.You agree here by that for any action taken on basis of above information in any manner writer or K M GATECHA & CO LLP is not responsible or liable for  any omission,reliability,accuracy,completeness,errors or authenticity.This work by professional is just for knowledge purpose and does not constitute any kind of  solicitation of work or advertisement.