LEAVE TRAVEL Concession

• LTC is given for Travelling anywhere in India
• Family includes Spouse,Children, (parents and siblings) dependent upon  the employee.
• The journey expenditure should be considered exempt upto the extent
  • Amount spent during journey
  • Amount could be spent if journey taken from the shortest route.

• Only 2 journey in block of 4 years is exempt.
• Exemption is allowed only if expenditure is made.
• Fare of more than 2 children is disallowed.

Good decision.

Leave enchashment :- An employee is allowed to take some leaves during a year. If he doesn’t take it , such leaves may be credited to his account which he may get encashed after the retirement or leaving the job or otherwise during his service time.

• Leave encashment during the service is taxable for every kind of employee.
• At the time of retirement or leaving job govt employee leave encashment is exempt. 
• At the time of retirement or leaving job non- govt employee leave encashment may be fully or partly exempt. 
• However relief under section 89 can be availed. 
• Earned leave entitlements can’t exceed 30 days a year.
• Friction of the years will be ignored.

Least of the following is exempt :-

1. Earned leave* average monthly salary.
2. 10 * average monthly salary.
3. The amount specified by the govt.      Rs.300,000
4. Leave encashment actually received.
    

Ques = x receives Rs.350,000 from his last employer in which Rs.15,000 is exempt. Then he joins another company and receives Rs.414000 as leave salary. Salary at the time of retirement :- Rs.230000 Average salary Mar1,2010- july31,2010 Rs.226,000 Aug1,2010- Dec31,2010 Rs.229,000 Duration of service 14.75 years. Leave taken 90 days

Answer =

Service period 14.75 = 14 years ( Reason given above)

Max leave allowed = 30 days

Leave taken = 90 days

Rest leave left for the purpose of leave encashment = (14*30-90)/30 =11 months.

For this average monthly salary is taken on basis of average monthly salary immediately preceding the retirement. So average monthly salary will be {(22900*5)+ (22600*5)}/10 = Rs.22,900

Gratuity =

1. Govt employee fully exempt.
2. Non-govt employee coverered by payment of gratuity act 1972 and not covered by the above act will be fully or partly exempt.
3. Least of the below will be exempt :-
   1. 15/30 days average salary* No of years service completed.
   2. Maximum limit of 10 lakh
   3. Gratuity actually received.
4. Non covered by the act employees gratuity will be consided for 15/26  days.
5. For the employees covered under the act excess of  even1 day after 6 months will be considered a year.
6. But not covered by the act friction of the year will be ignored.
7. For the employees covered under the act salary will be salary+ DA
8.  For the employees uncovered under the act salary will be salary+ DA + Commission only if the terms of employment provide so and commission is given on the fixed percentage of the turnover.

In every case Gratuity average salary will be taken on the basis of last drawn salary.

Ques = X not covered by the act,retires on nov20,2010 from ABC LTD. And receives Rs.186,000 as gratuity after service of 38 years and 10 months. Salary is Rs.8000 Per month upto July 31,2010 & Rs.9000 per month from aug1,2010 . Besides he get Rs.500 Permonth as DA (69% is considered for all retirement benefits)

Answer =

Salary Basic salary of average 10 months

Jan to July 8000*7                                                 56000

Aug to oct 9000*3                                                  27000

DA will be 69%of (500*10)                                     3450

Total                                                                           86450

Average salary                                                          8645

If still any doubt remained, then let me know about that as well.

Regards

Renu

Under LTC, if 2 journeys are not availed or if 1 journey remains standing at the credit of the emplyee in the block of 4 years, then only 1 journey is carried forward and which shall be availed in the 1st year of the block of 4 years! 

Eg:

If Mr. X doesn't  take the benefit of LTC or only takes a single LTC from the block of 4 years starting from 2001 to 2004 then she shall recieve at his credit only 1 'ADDITIONAL'  LTC Exemption benefit for the block of next 4 years strarting from 2005 to 2009.

There was a question regarding Leave Travel Concession in May 2011 Examination..Its a good drafted Question...Unfortunately i did it wrong..i didnt give importance to it.My fault..so .friends you all go through it once and solve it.

Right point noted Jinay.

@ karthik ...

thanks for letting us know ..., we will also give more attention to LTC. So that next time if this q comes, we can fetch marks.

@ hardik bhai ..

thanks for encouraging me as always bhai

@ Renu

With regard to Gratuity, can you clarify whether the employee who worked in public sector bank for 10+ years will come under Government Category or Non-government employee category? Are they entitled to claim Rs. 10 Lakhs amended limit?