Jigar M. Patel
International Tax Attorney
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.
Provisions for Exemption of LTC/LTA
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 two children of the individual; and
- The parents, brothers and sisters of the individual, who are wholly and mainly dependent on him.
Two Travels in a Block of Four Years Exempt
LTC Exemption is available in respect of two journeys performed in a block of four years. The current block is for the calendar years 2022 to 2025. If an employee has not availed the benefit of LTC 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 2018-21, Sharma availed LTC exemption only once or did not avail any exemption at all. In such circumstances, he would be eligible for the benefit of the carry over concession. Accordingly, Sharma could have claimed the benefit of LTC exemption in 2022 (being the first year of the next block). In addition to the same, he can also avail exemption on two more occasions during the block 2022-25.
Important Conditions for Exemption
The following important conditions for availing exemption in regard to LTC 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
Quantum of LTC exemption in respect of journeys performed has been determined 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 of a public transport system. However, where no recognized public transport system exists, air-conditioned first class rail fair (as if journey has been performed by rail).
