Income-tax exemption for payment of deemed LTC fare for non-Central government employees
New Delhi: In view of the COVID-19 pandemic and resultant nationwide lockdown in addition to disruption of transport and hospitality sector, as additionally the necessity for observing social distancing, quite a few workers aren’t capable of avail of Leave Travel Concession (LTC) within the present Block of 2018-21.
With a view to compensate Central authorities workers and incentivise consumption, thereby giving a lift to consumption expenditure, the Government of India allowed cost of money allowance equal to LTC fare to Central Government workers topic to fulfilment of sure situations vide OM No F. No 12(2)/2020-EII (A) dated 12th October 2020.
It has additionally been supplied that for the reason that money allowance of LTC fare is in lieu of deemed precise journey, the identical shall be eligible for income-tax exemption on the traces of present income-tax exemption obtainable for LTC fare.
In order to offer the advantages to different workers (i.e. non-Central authorities workers) who aren’t coated by the above talked about OM, it has been determined to offer the same income-tax exemption for the cost of money equal of LTC fare to the non-Central Government workers additionally. Accordingly, the cost of money allowance, topic to a most of Rs 36,000 per individual as Deemed LTC fare per individual (Round Trip) to non-Central Government workers, shall be allowed income-tax exemption topic to fulfilment of situations laid out in para 4.
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The income-tax exemption to receipt of deemed LTC fare by a non-Central Government worker (‘the employee’) shall be allowed topic to fulfilment of the next situations:-
(a) The worker workout routines an choice for the deemed LTC fare in lieu of the relevant LTC within the Block 12 months 2018-21.
(b) The worker spends a sum equals to a few instances of the worth of the deemed LTC fare on buy of products / providers which carry a GST price of not lower than 12% from GST registered distributors / service suppliers (‘the specified expenditure’) via digital mode in the course of the interval from the 12th of October, 2020 to 31st of March, 2021 (‘specified period’) and obtains a voucher indicating the GST quantity and the quantity of GST paid.
(c) An worker who spends lower than 3 times of the deemed LTC fare on specified expenditure in the course of the specified interval shall not be entitled to obtain full quantity of deemed LTC fare and the associated income-tax exemption and the quantity of each shall be lowered proportionately as defined in Example-A beneath.
The DDOs shall enable income-tax exemption topic to fulfilment of the above situations after acquiring copies of invoices of specified expenditure incurred in the course of the specified interval. Further, as this exemption is in lieu of the exemption supplied for LTC fare, an worker who has exercised an choice to pay revenue tax below concessional tax regime below part 115BAC of the Income-tax Act, 1961 shall not be entitled to this exemption.
The clarifications issued by the Department of Expenditure, Ministry of Finance for the Central Government workers vide OM F. No 12(2)/2020-EII (A) Dated 20th October 2020 and subsequent clarification, if any, issued on this regard shall apply mutatis mutandis to non-Central Government workers additionally topic to fulfilment of situations specified within the previous paras.
The legislative modification to the provisions of the Income-tax Act, 1961 for this function shall be proposed sooner or later.
Example-A
Deemed LTC Fare : Rs 20,000 x 4 = Rs 80,000
Amount to be spent : Rs 80,000 x 3 = Rs 2,40,000
Thus, if an worker spends Rs. 2,40,000 or above on specified expenditure, he shall be entitled to full deemed LTC fare and the associated income-tax exemption. However, if the worker spends Rs. 1,80,000 solely, then he shall be entitled to 75% (i.e. Rs. 60,000) of deemed LTC fare and the associated income-tax exemption. In case the worker already acquired Rs. 80,000 from an employer prematurely, he has to refund Rs. 20,000 to the employer as he might spend solely 75% of the required quantity.
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