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Tax Implications on Leave Travel Concessional (LTC) Assistance [Section 10(5)]

 

Through this provision employees are encouraged to travel anywhere in India along with their families and to help the employee the travel expenses are given by employer which are exempt u/s 10(5). The other details of this exemption are as follows  :

  1. If journey is performed by air. Least of following two amounts shall be exempted—
    (i) Economy class air fare of the national carrier by the shortest route.
    (ii) Actual amount spent by the employee on journey by air travel.

  2. If journey is performed by rail. Least of following two amounts shall be exempted—

(i) Air-conditioned first class rail fare by the shortest route.
(ii) Actual amount spent by the employee on journey by rail.

3. If place of origin of journey and place of destination is connected by rail. In case place of origin of journey and place of destination of journey of employee is connected with rail but the employee uses any other mode of transportation, the amount of exemption allowed shall be least of following 2 amounts—

(i) Air conditioned first class rail’ fare by the shortest route.
(ii) Actual amount spent by the employee on that journey.
 

4. If place of origin of journey and place of destination is not connected by rail

(a)             If a recognised public transport system is operating. Least of following 2 amounts shall be exempted—

      1. First class or delux class fare by the shortest route.

      2. Actual amount spent by the employee on that journey.

(b) If a recognised public transport system does not exist. Least of following 2 amounts shall be exempted— -

                  (i)         Air conditioned first class rail fare by the shortest route. (It is presumed that journey has been undertaken by rail).

                        (ii)        Actual amount spent by the employee on this journey.

Other Points :

(a)       Block of 4 years.     A block will consist of 4 calendar year, e.g.,

2004—2007 — 1-1-2004—31-12-2007
2008—2011 — 1-1-2008—31-12-2011
2012—2015 — 1-1-2012—31-12-2015

An exemption under this clause shall be allowed only in case of two journeys undertaken by the employee in one block of 4 calendar years.

(b)       Carry over clause. In case employee could not avail of the benefit of this exemption in any block of 4 years by not undertaking one or both the journeys, the benefit of this exemption can be claimed in the first calendar year of the next block.

For example, the employee could not undertake any or both the journeys in the block of 2008- 2011, then he can claim the benefit of carry over and undertake the journey and get the exemption in the first calender year of the next block, i.e., in the calender year of 2012. The benefit of exemption of 2 journeys in this block will also be available.

(c)        Rail/Air/Bus fare only. The exemption shall be available only and strictly in case of rail, air and bus fare. Any other type of expenditure incurred by the employee is to be ignored.

(d)       Exemption only regarding actual expenditure. Exemption shall be allowed only if the journey has been undertaken and actual expenditure incurred on fare shall be eligible for exemption.

(e)        Family. ‘Family’ for this purpose shall include legally wedded wife/husband, children and parents, brothers, sisters of the employee if they are wholly and mainly dependent upon the employee.

(f)        Not more than 2 children. This exemption shall be available only in case of 2 children of the employee but this restriction does not apply in respect of children born before 1-10-1998 and also in respect of multiple births after one child.

2. Perquisites and Allowances paid by Government to its employees posted outside India [Section 10(7)]

Any perquisite or allowance given by Government to its employees who are working outside India is fully exempt from tax. As such Motor car provided to employee working outside India or house rent allowance or any other such benefit is fully exempted from tax.

 
More.. Topics ... @ ' SALARY'
Salary-Definition & Meaning

Computation of Salary Income

Definition of Word ‘Salary’ [ Section 17(1)]

Section-15 : List of Incomes Chargeable to Income Tax under the head ‘ SALARIES’

Important Points / Characteristics for Computing Salary Income

Provident Fund

Treatment of Provident Funds (PF) for Computing Salary Income

Taxable Portion of annual accretion to RPF [Section 17(1)(vii)]. for Computing Salary Income

Transferred Balance from URPF to RPF [Section 17(1)(vii] for Computing Salary Income

Refund from Provident Fund [Section 17(3)(ii)] for Computing Salary Income

New Pension Scheme [ NPS] for Central Government and other Employees joining new jobs on or after 1-1-2004 for Computing Salary Income

 
Allowance [ Section 17(3)]

Allowance [ Section 17(3)] – for Computing ‘Salary’ Income

Fully Exempted Allowances for Computing ‘Salary’ Income

Fully Taxable Allowances for Computing ‘Salary’ Income

House Rent Allowance (HRA) for Computing ‘Salary’ Income

Allowances covered u/s 10 (14) for Computing ‘Salary’ Income

Meaning Of Salary For Different Purposes
PERQUISITES [Section 17(2)]

Meaning and Types of Perquisites [ Section 17(2)]

Taxability of Perquisites for Computing Salary Income

Perks Exempted From Tax for all Employees and not added in Salary Income

Rent Free House [Section 17(2)(i) Rule 3(1)]

Rules Regarding Calculation Of Value Of Rent Free House

Valuation Of Rent Free Accomodation (Unfurnished & Furnished)

Valuation of Rent Free Accommodation Provided as Concessional Rent [Sec. 17(2)ii)]

Obligation of Employee of Rent Free House met by Employer [Section 17(2)(iv)]

Sum payable by the Employer directly or through a fund to effect an assurance / an annuity [Section 17(2)(v)]

Any specified security or sweat equity shares allotted or transferred to employee [Section 17(2)(vi)] [ w.e.f. 1-4-2009]

Contribution to an Approved Superannuation Fund by the Employer [Sec. 17(2)(vii)]

Interest free or Concessional loan from employer [Rule 3(7)(i)]

Valuation of Perk in respect of Travelling, Touring, Accommodation

Food or Beverages Facility by Employer to Employee

Valuation of Perquisite in respect of Gift Voucher or Token

Valuation of Perquisite in respect of Credit Card

Valuation of Perquisite in respect of Club Facility

Use of Moveable Assets by Employer to Employee

Transfer Of Moveable Assets to the employee

Meaning of Specified Employee for Taxable Perquisites [Section 17(2)(iii) Rule 3]

Valuation of Perquisite of Motor Car or any Other Automotive Conveyance [Rule 3(2)]

Perquisite of Free domestic servants [Rule 3(3)]

Perquisite in respect of free supply of gas, electric energy, water supply [Rule 3(4)]

Free Educational Facilities to Children of Employee’s Household [Rule 3(5)]

Facility of Free or Concessional Private Journey to an employee by the employer engaged in the carriage of passengers or goods [Rule 3(6)]
PROFITS IN LIEU OF SALARY [17(3)]

Receipts treated as Profit in Lieu of Salary [ Section 17(3)]

Leave Travel Concessional (LTC) Assistance [Section 10(5)]

Death-Cum-Retirement Gratuity [Section 10(10)]

Non-Government employees receiving gratuity under payment of Gratuity Act, 1972 [POGA]

Non-Government Employees receiving gratuity (Not covered under payment of Gratuity Act)

PENSION [Monthly and Commuted] for Computing Salary Income

Leave Encashment [Section 10(10AA)] for Computing Salary Income

Any amount received as compensation on termination of employment [Section-10B]

Any amount received on voluntary retirement [Section 10(10C)]

Payment received from Recognised Provident Fund [Section 10(12)]

Any payment from Superannuation Fund [Section 10(13)]

 
DEDUCTIONS OUT OF GROSS SALARY [ Section-16]

Entertainment Allowance to Government Employees [Section-16(ii)]

Tax on Employment Under Section - 16(iii)

 
DEDUCTIONS U/S 80C OUT OF GROSS TOTAL INCOME

Section - 80C : Deductions from Gross Total Income (GTI) in case of Individual and HUF

Qualifying Amount ( Q.A.) for Deduction U/s 80C

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