Get deduction towards Leave Travel Allowance without actual Travel now

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Get deduction towards Leave Travel Allowance without actual Travel now

Section 10(5) of the Income Tax Act – 1961 provides for exemption in respect of Leave Travel Concession (LTC) or Leave Travel Allowance (LTA).

Covid-19 has totally changed the way in which business was going on. Similarly, it has also resulted in a lot of amendments and changes in the Tax Laws.

There were many employees who were in receipt of Leave Travel Allowance (LTA) who could not travel or incur an expenditure on travel due to restrictions of Covid.

To ease the burden of the salaried taxpayers in such cases, the Government has come out with an altogether different scheme to grant an exemption against LTA. This new amendment has been specifically introduced for the AY 2021-22 only.

At present, for claiming exemption in the FY 2020-21, expenditure has to be incurred on or before 31/03/2021 as the current predefined block of 4 years is 2018-2021. In case, the amount remains unclaimed it can be utilised during the 1st journey of the next block.

This was announced in the Union Budget -2021 as well. As per the amendment proposed by the Union Budget-2021, LTA exemption can be claimed by an employee if expenditure done by employees on the purchase of goods or towards services which is liable for GST. The terms & Conditions for claiming an exemption in such cases has been prescribed as under:

  1. Employee has an option for deemed LTC fare in lieu of the applicable LTC in the block year 2018-21
  2. Amount has to be incurred on purchase/service attracting a minimum of 12% of GST.  It is referred to as “Specified expenditure”.
  3. This expenditure has to be incurred in the specified period. The specified period has been defined as the period from 12/10/2020 to 31/03/2021.
  4. Goods and Services to be purchased from a registered GST dealer.
  5. Total deduction shall not exceed Rs. 36,000/- OR 1/3rd of total expenditure, whichever is less.
  6. Payments to be done only through digital modes
  7. All Invoices of the purchase has to submitted to the employer
  8. Total expenditure to be incurred has to be a minimum of three times the LTA.

The purpose is clear. The situation is out of control of an employee. So, an alternative is given to an employee against such an impossible act. The present move is expected to boost the economy as the money will get in rotation for claiming LTA deduction by an employee.

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