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Leave Travel Concession/Assistance [Section 10(5)]

Various payments received whether from present or past employer is taxable as profit in lieu of salary. The receipts are exempted to the extent mentioned here. Generally, employees are encouraged to travel anywhere in India along with their families and to help the employee the travel expenses are given by the employer which is exempt u/s 10(5). The details of this exemption are as follows:

Section 10(5): Leave Travel Concession/Assistance

1. If journey is performed by air

Least of following two amounts shall be exempted

  • Economy class air fare of the national carrier by the shortest route.
  • Actual amount spent by the employee on journey by air travel.

2. If journey is performed by rail

Least of following two amounts shall be exempted

  • Air-conditioned first class rail fare by the shortest route.
  • Actual amount spent by the employee on journey by rail.

3. If place of origin of journey and place of destination is connected by rail

In case place of origin of journey and place of destination of journey of employee is connected with rail but the employee uses any other mode of transportation, the amount of exemption allowed shall be least of following 2 amounts:

  • Air conditioned first class rail fare by the shortest route.
  • Actual amount spent by the employee on that journey.
 

4. If place of origin of journey and place of destination is not connected by rail

(a) If a recognized public transport system is operating. Least of following 2 amounts shall be

Exempted:

  • First class or delux class fare by the shortest route.
  • Actual amount spent by the employee on that journey.

(b) If a recognized public transport system does not exist. Least of following 2 amounts shall be exempted

  • Air conditioned first class rail fare by the shortest route. (It is presumed that journey has been undertaken by rail).
  • Actual amount spent by the employee on this journey.

Other important Provisions

Block of 4 years: An exemption under this clause shall be allowed only in case of two journeys undertaken by the employee in one block of 4 calendar years.

For the assessment year beginning on the 1st day of April, 2021, where the individual referred to in sub-rule (1) avails any cash allowance from his employer in lieu of any travel concession or assistance, the amount exempted under the second proviso to clause (5) of section 10 shall be the amount, not exceeding thirty-six thousand rupees per person, for the individual and the member of his family, or one-third of the specified expenditure, whichever is less, subject to fulfilment of the following conditions, namely:-

 

(i)

 

the individual has exercised an option to avail exemption under the second proviso of clause (5) of section 10, in lieu of the exemption under clause (5) of section 10 in respect of one unutilized journey during the block of four calendar years commencing from the calendar year 2018;

(ii)

 

the payment in respect of the specified expenditure is made by the individual or any member of his family to a registered person during the specified period;

(iii)

 

the payment in respect of the specified expenditure is made by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under rule 6ABBA; and

(iv)

 

the individual obtains a tax invoice in respect of specified expenditure from the registered person referred in clause (ii)

  • Carry over clause: In case employee could not avail of the benefit of this exemption in any block of 4 years by not undertaking one or both the journeys, the benefit of this exemption can be claimed in the first calendar year of the next block
  • Rail/Air/Bus fare only: The exemption shall be available only and strictly in case of rail, air and bus fare. Any other type of expenditure incurred by the employee is to be ignored
  • Exemption only regarding actual expenditure: Exemption shall be allowed only if the journey has been undertaken and actual expenditure incurred on fare shall be eligible for exemption.
  • 'Family' for this purpose shall include legally wedded wife/husband, children and parents, brothers, sisters of the employee if they are wholly and mainly dependent upon the employee. Not more than 2 children. This exemption shall be available only in case of 2 children of e employee but this restriction does not apply in respect of children born before 1-10-1998 and also respect of multiple births after one child.

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Category Income Tax, Other Articles by - Ritik Chopra 



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