Section 10(5)- Treatment of Leave Travel Concession or Assistance (LTC/LTA)

[Exemption will not be available if the employee opts to be taxed under section 115BAC]

The employee is entitled to exemption under section 10(5) in respect of the value of travel concession or assistance received by or due to him from his employer or former employer for himself and his family, in connection with his proceeding—

(a)     on leave to any place in India.

(b)     to any place in India after retirement from service or after the termination of his service.

The exemption shall be allowed subject to the following:

(i)      where journey is performed by air — Maximum exemption shall be an amount not exceeding the air economy fare of the National Carrier by the shortest route to the place of destination;

(ii)     where places of origin of journey and destination are connected by rail and the journey is performed by any mode of transport other than by air — Maximum exemption shall be an amount not exceeding the air-conditioned first class rail fare by the shortest route to the place of destination; and

(iii)    where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed between such places — The amount eligible for exemption shall be:

(A)    where a recognised public transport system exists, an amount not exceeding the 1 St class or deluxe class fare, as the case may be, on such transport by the shortest route to the place of destination; and

(B)     where no recognised public transport system exists, an amount equivalent to the air- conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail.

Exemption will, however, in no case exceed, actual expenditure incurred on the performance of journey.

HOW MANY TIMES CAN EXEMPTION BE CLAIMED?

• The assessee can claim exemption in respect of any two journeys in a block of 4 years. For this purpose, the first block of 4 years was calendar years 1986-89, second block was 1990- 93, third block was 1994-97, fourth block was 1998-2001, fifth block was 2002-05, sixth block was 2006-09, seventh block was 2010 to 2013, eighth block was 2014-17, the ninth block is 2018-2021 and tenth block will be 2022-2025.
• If the assessee has not availed of the exemption of LTC in a particular block, whether for both the journeys or for one journey, he can claim the exemption of first journey in the calendar year immediately succeeding the end of the block of four calendar years. In other words, maximum one journey can be carried forward and that too only for the first journey in the following calendar year unless the period is otherwise extended. Such journey undertaken during the extended period will not be taken into account for determining the tax exemption of two journeys for the succeeding block.

Exemption available only in respect of two children

The exemption relating to LTC shall not be available to more than two surviving children of an individual after 1.10.1998.

Exception: The above rule will not apply in respect of children born before 1.10.1998 and also in case of multiple birth after one child.