Special ‘Cash allowance’ to avail benefit of Leave Travel Allowance during FY 2020-21
- Blog|Income Tax|
- 3 Min Read
- By Taxmann
- |
- Last Updated on 6 April, 2022
Latest from Taxmann
Leave Travel Allowance is allowed by an employer to his employee for traveling to any place in India. If an employee goes on vacation, he can claim tax exemption for the Leave Travel Concession (LTC) or Leave Travel Allowance (LTA) received from the employer. The allowance shall be exempt from tax to the extent of actual expenditure incurred for journeys performed in India by himself and by his family. If there is an unutilized amount, it shall be taxable as perquisite in the hands of employees.
Due to the COVID-19 pandemic, employees are unable to travel to any place in India to claim an exemption for Leave Travel Allowance. To avoid the taxation of perquisite due to such uncertain times, the Finance Act, 2021 has amended Section 10(5) to provide tax exemption to cash allowance in lieu of LTC.
Section 10(5) has been amended to provide that for the assessment year beginning on 01-04-2021, the value in lieu of any travel concession or assistance received by, or due to, an individual shall also be exempt under this clause subject to fulfillment of conditions to be prescribed.
In exercise of such power, CBDT has amended Rule 2B to provide that where the employee avails of any cash allowance from his employer in lieu of any travel concession or assistance for the assessment year beginning on 01-04-2021, he shall be eligible to claim an exemption for an amount equals to lower of the following:
-
- 36,000 per person for the individual and the member of his family; or
- 1/3rd of expenditure incurred by an individual or a member of his family.
However, the exemption can be claimed subject to fulfillment of the following conditions:
-
- Such employee or his family members have incurred expenditure during the period commencing from 12-10-2020 and ending on 31-03-2021 on goods or services;
- Such goods or services are liable to GST at an aggregate rate of 12% or above;
- Such goods are purchased, or services are procured from GST registered vendors or service providers;
- Such Employee exercises an option to claim an exemption for the deemed LTC fare in lieu of the applicable LTC in respect of one unutilized journey during the block of four calendar years commencing from the calendar year 2018;
- The payment in respect of such expenditure is made by him or any member of his family to a registered person during the period commencing from 12-10-2020 and ending on 31-03-2021;
- The payment in respect of such expenditure is made by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or other electronic mode specified under Rule 6ABBA; and
- The individual obtains a tax invoice in respect of such expenditure from the registered person referred.
In general, tax exemption is allowed for 2 journeys undertaken by the employee in a block of 4 calendar years. The current block is 2018-2021 (i.e., January 1, 2018, to December 31, 2021). However, it has been clarified that where an employee has claimed exemption in respect of such cash allowances, he shall be eligible to claim an exemption in respect of one more journey in the block of 2018-21.
It has been further provided that the clarification issued in respect of central government employees vide OM F. No 12(2)/2020-EII (A) Dated 12-10-2020 and any subsequent clarifications shall apply mutatis mutandis to the exemption under Section 10(5) in respect of this cash package. One of such clarifications provides that submission of bills or claims may be entertained and settled by Ministries or Departments not later than 30-04-2021. However, it is reiterated that the payment for the purchases should be made not later than the due date, i.e., 31-03-2021.
Taxmann Academy presents the Tax and Accounts Professional (TAP) Course!
Enrol in the Foundation Level of TAP course and get practical training in book-keeping, Income-tax returns, GST returns, TDS returns, Payroll, MS-Office, Labour Laws, and much more.
Join Taxmann Academy Now! https://taxmann.social/aPDM
Don’t feel Trapped; Enrol in TAP!
Batch Begins April 2022
Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.
Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.
The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:
- The statutory material is obtained only from the authorized and reliable sources
- All the latest developments in the judicial and legislative fields are covered
- Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
- Every content published by Taxmann is complete, accurate and lucid
- All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
- The golden rules of grammar, style and consistency are thoroughly followed
- Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied
13 thoughts on “Special ‘Cash allowance’ to avail benefit of Leave Travel Allowance during FY 2020-21”
Leave a Reply
Sign Up
To subscribe to our weekly newsletter please log in/register on Taxmann.com
Latest Books
Everything on Tax and Corporate Laws of India
To subscribe to our weekly newsletter please log in/register on Taxmann.com
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 ?
In your case expenditure incurred in 2019-20 and not 2020-21 previous year as per my opinion you can claim lower of actual expenditure incurred or Leave travel allowance received.
How many times a government servant can avail the facility of Leave Travel Concession along with Leave Encashment for a particular block year? Please clarify.
An employer may provide leave travel allowance for all journeys an employee take in a year. However, tax exemption is allowed only for two journeys undertaken by the employee in a block of 4 calendar years. The current block is 2018-2021 (i.e. January 1, 2018 to December 31, 2021) and the next block shall be 2022-2025 (i.e. January 1, 2022 to December 31, 2025).
I want to claim LTC in Nov’2021 for 50,000 (for self and wife). Travel cost is nearly 60,000. Can I claim entire 50,000 as tax free if the payment was done in October’2021 ?
Exemption for LTC is allowed in respect of travel undertaken in a financial year. Thus, even if you have incurred cost in October, 2021, the exemption can be claimed in assessment year 2022-23 (previous year 2021-22) subject to fulfilment of conditions specified in Section 10(5) read with Rule 2B.
I am availing leave and travel is booked between Dec 27, 2021 to Jan 2, 2021 – how is LTA calculated and managed since this crosses between the two blocks of years for LTA?
Does the claim fall in 2018-2021 block or 2022-2025 block?
In absence of clarity in the law, you may take a position which is beneficial to you.
I am working in MNC and brought a car last year can I claim LTC for last Assessment YEAR as per above rule. Its not reflected in My Form16
if you have received cash allowance from your employer in lieu of LTC and purchased a car last year, you can claim exemption of up to Rs. 36,000 even if the same is not reflected in Form 16 provided all the specified conditions are satisfied.
is LTA mandatory or not in ctc???………How much minimum LTA in ctc?
In my paycheck, my employer pay me LTA as taxable income. In Tax Year 2021-22 (in Jul-21) I travelled from A to B, In Aug-21, I Travelled from B – C & in the same month back from C to A destination point. Travel was done by Air mode and just to add, I, my wife and my kid had with me. So, am I eligible for tax exemption? Your assistance will be appreciated. Thank you!
Hi Ankit, you will be entitled for LTA exemption. However, where the journey is performed in a circular form touching different places (like in your case from A to B, B to C, and then finally C to A), the exemption is limited to what is admissible for the journey from the place of origin to the farthest point reached in India, by the shortest route. Thus, the exemption shall be allowed for the travel cost incurred for the city (B or C) which is farthest from the place of origin (i.e., city A).