Cash Leave Travel Concession received from employee but no expenditure made on travel during Pandemic can also be claimed as exempt income

Under the existing provision of the Income Tax Act, 1961 (Act), Leave Travel Concession received by the employee from his employer, for himself and his family member, is exempt from its inclusion in total income, subject to the conditions specified in Rule 2B of the income Tax Rules, 1962 (Rules) and also upon actual expenditure on such travel to any place in India.

However, due to the current pandemic situation, most of the employees could not travel in India and thereby under the existing provision of section 10(5) could not be able to get such exemption due to the condition of actual expenditure on travel.

Therefore, in the light of the above difficulty faced by the employees, the Finance Ministry has opened a window to claim exemption for cash allowance for any other amount spent in lieu of    leave travel concession received by the employees subject to the fulfillment of conditions prescribed in this respect. This amendment has been made in Finance Act, 2021 via inserting a new proviso in Section 10(5) of (Act).

It means that if any expenditure has been by any individual or by his family member for purchase of any goods or services which is liable to GST at the rate of 12% or more, the same expenditure can be claimed by any individual as exempt in lieu of leave travel concession expenditure.

The conditions for this purpose has recently been prescribed by the CBDT vide Notification No. 50/2021 dated 05-05-2021 by inserting sub rule (1A) under the existing Rule 2B of the Rules. The said conditions are as follows:

1. LTC under section 10(5) is allowed for 2 journeys during the period from 01-4-2018 to 31-03-2021. This benefit under new provision for claiming other expenditure in lieu of LTC can only be claimed for 1 unutilized journey during this period.
2. The payment of that expenditure in lieu of travel by any individual or his family should be made to any registered person under CGST Act, 2017.
3. The period of such expenditure other than travel should be from 12-10-2020 to 31-03-2021
4. Payment for such expenditure should have been made by other than cash mode.
5. The individual should possess tax invoice for such expenditure other than travel.

Limit on the amount of exemption

The maximum amount for claiming such exemption is lower of the following:

1. 36,000/- per person for individual and his family member or
2. One third of the amount actually spent during that period

Alert

For any particular tax invoice, only one employee can claim the above said exemption.

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