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LEAVE TRAVEL CONCESSION
WHAT ARE THE LIMITS OF EXEMPTION IN L.T.C. granted to an employee in connection with the journey on leave by him or his family? It is exempt from income tax within certain limits as under:
(a) Where the journey is performed by rail: railway fare in Second AC class by the shortest route to the destination.
(b) Where places of origin and destination are connected by rail but the journey is performed by any other mode, then the Second AC class fare by the shortest route to the place of destination.
(c) Where the place of origin of the journey and the destination, or part thereof, are not connected by rail and the journey is performed by any other transport:
(i) If a recognized public transport system exists between such places, the first-class or deluxe class fare of such transport by the shortest route, or,
(ii) If in another case, the Second AC class fare for the distance of the journey by the shortest route, as if the journey has been performed by rail.
The exemption will, in no case, exceed the actual expenditure incurred in the performance of the journey.
Leave Travel Concession Rules have been amended on the recommendation of the Fifth Pay Commission to extend the facility of travel by air economy Y-Class to certain categories of employees of the Central Government with effect from 1st October 1997.
Consequently, where the journey is performed on or after 1st October 1997 by air, an amount not exceeding the air economy fare of the National Carrier by the shortest route to the place of destination.
Also, where the entitlement was previously for air-conditioned Second Class Rail fare, it has been upgraded to air-conditioned First Class Rail fare. [L.T. (First Amendment) Rules 1998, O.O.I. Gazette Notification No. S.O. 34(E) dt. 12th Jan. 1998; CBDTF.No. 142/85/97-TPL No. 105021].
WILL THIS CHANGE APPLY ONLY TO GOVERNMENT EMPLOYEES OR DOES IT APPLY ALSO TO EMPLOYEES OF OTHER SECTORS?
The change applies to all employees.
HOW MANY TIMES CAN EXEMPTION BE CLAIMED?
The assessee can claim exemption in respect of two such journeys in a block of 4 years. For this purpose, the first block of 4 years was the calendar year 1986-89. For a block of 4 years, the journey performed in the first year following that block year is also eligible for exemption. Also, such a journey will not be taken into account for determining the tax exemption for the succeeding block.
TO QUALIFY FOR EXEMPTION, IS IT NECESSARY TO PERFORM AN ACTUAL JOURNEY?
Yes, certainly. In case the L.T.C. is encashed without actually performing the journey, the entire amount received by the employee would be taxed in his hands.
WHAT IS THE DEFINITION OF FAMILY FOR THIS PURPOSE?
For this purpose, "family" means:
(i) The spouse and children of the individual; and
(ii) The parents, brothers, and sisters of the individual or any of them, wholly or mainly dependent on the individual.
HAS ANY CHANGE BEEN MADE IN RULES FOR THE EXEMPTION OF L.T.C. TO DENY THIS BENEFIT TO LARGE FAMILIES?
Yes. Exemption of L.T.C. shall not be available to more than two surviving children of an individual after 1st October 1998. However, this shall not apply in respect of children born before 1.10.98 and also in the case of multiple births after one child. If an employee has before 1.10.98 even five children or more, exemption would still be available to all children. However, if an employee begets a third child after 1.10.1998, the L.T.C. for the third child will not be exempt.
ENCASHMENT OF EARNED LEAVE
As the name suggests, it is the amount received by the employee for the leave period not availed by him.
IS ENCASHMENT OF EARNED LEAVE EXEMPT AT THE TIME OF RETIREMENT?
Yes, subject to certain limits. If it relates to a Government employee, his retirement from service on superannuation or otherwise, it is fully exempt.
In the case of other employees, the exemption from Income-tax is in respect of encashment of up to the maximum of 8 months earned leave calculated at the average of the last 10 months' salary. There is also a maximum monetary limit which is Rs. 1,35,360 for a person retiring on or after 1.7.95.
This limit is applied to the aggregate amount of such payments received from two or more employers, whether received in the same year or in different years.
IS ENCASHMENT OF LEAVE DURING THE EMPLOYMENT ALSO EXEMPT?
No, encashment of leave at any time during the employment is taxable in full.
Regards,
Anuradha
From India, Pune
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I think this will help you....
LEAVE TRAVEL CONCESSION
WHAT ARE THE LIMITS OF EXEMPTION IN L.T.C. granted to an employee in connection with the journey on leave by him or his family? It is exempt from income tax within certain limits as under:
(a) Where the journey is performed by rail: railway fare in Second AC class by the shortest route to the destination.
(b) Where places of origin and destination are connected by rail but the journey is performed by any other mode, then the Second AC class fare by the shortest route to the place of destination.
(c) Where the place of origin of the journey and the destination, or part thereof, are not connected by rail and the journey is performed by any other transport:
(i) If a recognized public transport system exists between such places, the first-class or deluxe class fare of such transport by the shortest route, or,
(ii) If in another case, the Second AC class fare for the distance of the journey by the shortest route, as if the journey has been performed by rail.
The exemption will, in no case, exceed the actual expenditure incurred in the performance of the journey.
Leave Travel Concession Rules have been amended on the recommendation of the Fifth Pay Commission to extend the facility of travel by air economy Y-Class to certain categories of employees of the Central Government with effect from 1st October 1997.
Consequently, where the journey is performed on or after 1st October 1997 by air, an amount not exceeding the air economy fare of the National Carrier by the shortest route to the place of destination.
Also, where the entitlement was previously for air-conditioned Second Class Rail fare, it has been upgraded to air-conditioned First Class Rail fare. [L.T. (First Amendment) Rules 1998, O.O.I. Gazette Notification No. S.O. 34(E) dt. 12th Jan. 1998; CBDTF.No. 142/85/97-TPL No. 105021].
WILL THIS CHANGE APPLY ONLY TO GOVERNMENT EMPLOYEES OR DOES IT APPLY ALSO TO EMPLOYEES OF OTHER SECTORS?
The change applies to all employees.
HOW MANY TIMES CAN EXEMPTION BE CLAIMED?
The assessee can claim exemption in respect of two such journeys in a block of 4 years. For this purpose, the first block of 4 years was the calendar year 1986-89. For a block of 4 years, the journey performed in the first year following that block year is also eligible for exemption. Also, such a journey will not be taken into account for determining the tax exemption for the succeeding block.
TO QUALIFY FOR EXEMPTION, IS IT NECESSARY TO PERFORM AN ACTUAL JOURNEY?
Yes, certainly. In case the L.T.C. is encashed without actually performing the journey, the entire amount received by the employee would be taxed in his hands.
WHAT IS THE DEFINITION OF FAMILY FOR THIS PURPOSE?
For this purpose, "family" means:
(i) The spouse and children of the individual; and
(ii) The parents, brothers, and sisters of the individual or any of them, wholly or mainly dependent on the individual.
HAS ANY CHANGE BEEN MADE IN RULES FOR THE EXEMPTION OF L.T.C. TO DENY THIS BENEFIT TO LARGE FAMILIES?
Yes. Exemption of L.T.C. shall not be available to more than two surviving children of an individual after 1st October 1998. However, this shall not apply in respect of children born before 1.10.98 and also in the case of multiple births after one child. If an employee has before 1.10.98 even five children or more, exemption would still be available to all children. However, if an employee begets a third child after 1.10.1998, the L.T.C. for the third child will not be exempt.
ENCASHMENT OF EARNED LEAVE
As the name suggests, it is the amount received by the employee for the leave period not availed by him.
IS ENCASHMENT OF EARNED LEAVE EXEMPT AT THE TIME OF RETIREMENT?
Yes, subject to certain limits. If it relates to a Government employee, his retirement from service on superannuation or otherwise, it is fully exempt.
In the case of other employees, the exemption from Income-tax is in respect of encashment of up to the maximum of 8 months earned leave calculated at the average of the last 10 months' salary. There is also a maximum monetary limit which is Rs. 1,35,360 for a person retiring on or after 1.7.95.
This limit is applied to the aggregate amount of such payments received from two or more employers, whether received in the same year or in different years.
IS ENCASHMENT OF LEAVE DURING THE EMPLOYMENT ALSO EXEMPT?
No, encashment of leave at any time during the employment is taxable in full.
Regards,
Anuradha
From India, Pune
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