Leave Travel Concession (LTC):
The following are the important points, to be taken into
consideration, for claiming exemption u/s 10(5) of the Act, read with
Rule 2B of the Rules:
1. Definition - Value of LTC received by or due to
an individual from his present or previous employer, as the case may be,
for himself and his family in connection with his proceeding on leave
to any place in India or to any place in India after retirement or
termination from/of service. The exemption shall be available either if
the employee is travelling alone or accompanying his family. But,
exemption shall not be available if the family members are travelling
separately without the employee who is not on leave.
2. Number of Trips - The exemption shall be available in respect of 2 journeys performed in the block of 4 calendar years.
• On declaration basis - Without performing any journey and incurring expenses thereon, no exemption can be claimed.
• On Non-declaration basis - The quantum of
exemption will be subject to the following maximum limits for journeys
performed on or after
1-10-1997:
| Sl. No | Journey Performed by | Exemption Limit | |
| 1 | Air | Air Economy fare of the national carrier (Air India) by the shortest route to the place of destination | |
| 2 | Places connected by rail and journey performed by any mode other than by air. | First Class Air conditioned rail fare by the shortest route to the place of destination | |
| 3 | Place of origin and destination or part thereof not connected by rail. |
(a) Where public transport system exists, first
class or deluxe class fare on such transport by the shortest route to
the place of destination.
(b) Where no public transport system exists,
first class A/C rail fare, for the distance of the journey by the
shortest route, as if the journey has been performed by rail
|
○ This exemption is limited to the actual expenses
incurred on the journey which in turn is strictly limited to expenses
on air fare, rail fare and bus fare only. No other expenses like local
conveyance, sight-seeing expense etc., shall qualify for exemption.
○ Where the journey is performed in a circuitous
route, the exemption is limited to what is admissible by the shortest
route. Likewise, where the journey is performed in a circular form
touching different places, 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.
• Restriction on children - The exemption will
not be available to more than 2 surviving children of an individual born
after 1-10-1998. This restriction shall not apply in respect of
children born before 1-10-1998 and also in case of multiple births after
one child. It may be noted that section 2 (15B) of the Act defines a
child as includes a step child and an adopted child of the individual.
• Definition of Family - As per the provisions of the Rules, family means:
○ Spouse and children of the individual.
○ Parents, brothers and sisters who are wholly or mainly dependent on the individual.
• Foreign Travel - As per the provisions of the Rules, exemption is not allowable in case of travel abroad.
• Obligation of the employer -the employer has to
satisfy the obligation that leave travel (fare) concession is not
taxable in view of section 10(5), the employer is not only required to
be satisfied about the ingredients of the said clause but also to keep
and preserve evidence in support thereof.
Some important points to be considered are as under:
1. It is uniform for all employees
2. Where an employee does not avail LTC, either one
or on both the occasions during the block of 4 calendar years, the
value of LTC first availed during the first calendar year of the
immediately succeeding block shall be eligible for exemption in lieu of
exemption not availed during the preceding block Only one trip can be
carried forward to be availed in the immediately succeeding block.
3. Quantum of Exemption - The basic rule is that
quantum of exemption will be limited to the actual expense incurred on
the journey.
