LTC income tax exemption for private employees: Here’s how to understand the tax calculation
New Delhi: In the wake of the COVID-19 pandemic and resultant social distancing, a number of workers aren’t capable of avail of Leave Travel Concession (LTC) within the present Block of 2018-21.
The Government, with a view to compensate workers and incentivise consumption, has allowed fee of money allowance equal to LTC fare to Central Government workers topic to fulfilment of sure situations. It has additionally been supplied that because the money allowance of LTC fare is in lieu of deemed precise journey, the identical shall be eligible for income-tax exemption on the strains of present income-tax exemption accessible for LTC fare.
In order to supply the advantages to different workers (i.e. non-Central Government workers) who aren’t lined by the above talked about OM, the federal government has been determined to supply related income-tax exemption for the fee of money equal of LTC fare to the non-Central Government workers additionally.
Accordingly, the fee of money allowance, topic to most of Rs 36,000 per particular person as Deemed LTC fare per particular person (Round Trip) to non-Central Government workers, shall be allowed income-tax exemption.
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:-
The worker workouts an possibility for the deemed LTC fare in lieu of the relevant LTC within the Block 12 months 2018-21.
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 charge 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.
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 diminished proportionately.
For instance, you’ll be able to pattern the next calculation
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, on the idea of the above quantity, if an worker spends Rs 2,40,000 or above on specified expenditure, he/she shall be entitled for 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 for 75% (i.e. Rs 60,000) of deemed LTC fare and the associated income-tax exemption.
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In case the worker already acquired Rs 80,000 from employer upfront, he/she has to refund Rs 20,000 to the employer as he might spend solely 75% of the required quantity.
The DDOs shall permit 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 for this exemption.
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