Leave Travel Concession – Income Tax Exemption

Government has recently made an announcement on 29th October, 2020 in continuation to an earlier announcement made vide Office memorandum F.No. 12(2) /2020-EII (A) dated 12th October, 2020, that all non-central government employees will be eligible for income tax exemption for the entire leave travel concession amount maximum up to Rs 36,000 per person as deemed LTC fare per person (round trip) without producing his travel bills. However, such employees will have to spend three times the amount for purchasing goods or services on which GST of 12% or higher is levied.

Employees will have to make the purchases through digital payment mode only and submit the invoices to avail the benefit.

However, few points need to be adhere while claiming the benefit under this scheme-

1. Only those employees will be eligible for this scheme those haven’t already availed the tax benefit exemption during the block of Jan 2018- Dec 21.

2. Employee who spends less than 3 times the fare amount will get proportionate income tax exemption.

3. Purchases have to be made within the period of 12th October, 2020 to 31st March, 2021.

4. This scheme benefit is not available to an employee who has exercised an option to pay income tax under new income tax / concessional tax regime.

Example is hereby given below to understand its eligibility, suppose if the LTC fare is Rs 20,000, and is claimed for a family of four, then the employee would get Rs 80,000 (20,000 x 4). The amount that the employee will have to spend would be Rs 2,40,000 (Rs 80,000 x 3). However, if the employee ends up spending only Rs 1,80,000, the person would get tax exemption of Rs 60,000 only (75% of 80,000).