Tax Implications of LTC under Different Tax Regimes

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This discussion clarifies the taxability of Leave Travel Concession (LTC) depending on the tax regime chosen. While LTC is generally not taxed under the old regime, it becomes taxable under the new regime. The specific case highlights an employee who received an LTC advance in the old regime but the final payment in the new regime, raising questions about tax liability.

Manjit Singh

Manjit Singh (Querist)
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25 June 2024 LTC is not taxable under the old tax regime but is taxable under the new tax regime.

An employee adopted the old tax regime in the financial year 2022-23 and took a ₹50,000 advance from his department and availed the LTC. The employee also submitted a claim for the remaining ₹20,000 of LTC to his department in the same financial year.

However, his department processed and paid the remaining ₹20,000 in the next financial year 2023-24. In 2023-24, the employee switched to the new tax regime.

Therefore, will income tax be levied on the ₹70,000 received by the employee?