LTC Exemption of Rs. 36000 per family member For FY 2020-21 also available to non-Government Employees

Income Tax Exemption of Rs. 36,000 per family member to a Salaried person for the Financial year 2020-2021 (also available to Private Sector Employees)

Many Salaried employees get Leave Travel Concession (LTC) from their Employers which is exempt to the extent it is actually spent on traveling. LTC which could not be spent is taxable in the hands of employees. However, in view of the COVID-19 pandemic and resultant nationwide lockdown, many employees were not able to travel and were thus not able to avail the benefit of LTC for the FY 2020-2021.

Thus, the Government has provided for Income tax exemption on account of value in lieu of Leave Travel Concession.

  • Amount of Exemption: 1/3rd of the amount spent on the purchase of goods or services from GST Registered vendors/service providers on which GST rate is 12% or more (i.e. 12% or 18% or 28%).
  • Maximum amount of exemption: 36,000 per family member. (Eg. If 3 members in the family – then Exemption of Rs. 1,08,000)
  • Expense / Purchase should have been made between 12th October 2020 to 31st March 2021.
  • Payment should be made through digital mode. (i.e. it should not be in cash)
  • The employee exercises an option for the deemed LTC fare in lieu of the applicable LTC in the Block year 2018-21.
  • Employee should obtain GST invoice from the vendor/service provider.
  • Family Member means spouse and children of the individual. The family also includes parents/brother/sister dependent on the individual.

To claim the above exemption – The Employee should intimate the Employer about the details of specified expenditures (i.e. on which GST rate is 12% or more) along with supporting vouchers. The employer will accordingly deduct lower TDS after considering this exemption. If the employee is unable to intimate the employer, he/she can claim the exemption while filing their income tax return for the Financial year 2020-21 (The assessment year 2021-22)

Note: If an employee opts for a new tax regime u/s. 115BAC of the Income Tax Act, then such employee would not be eligible to claim the above exemption of LTC Cash Scheme.

Example: You can also claim a deduction if you have purchased TV/Computer/AC/Car/Mobile, etc. between 12th October 2020 to 31st March 2021 subject to fulfilment of the above conditions.

I hope you find this useful.

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