New Tax Rules For Leave Travel Concession- Here's How To optimise This Holiday Season
Employees can claim a Leave Travel Concession, which is an exemption from income tax, for costs incurred while on leave anywhere in the nation. This travel expense is frequently paid by the company. It is in addition to the wage and encourages industrious employees to relax and take time away from work to vacation.
Simplified Income Tax Act Provisions Included in the LTC
- According to the Income Tax Act, only expenses such as ticket costs for the employee and his family are excluded.
- Food, housing, shopping, and tourist expenses would be removed from such calculations.
- Employer and family travel expenses are authorised to any location in India twice every four calendar years.
- The current income tax exemption period runs from 2018 to 2021.
- According to the Income Tax Act, this reimbursement can be claimed for LTA if the employee’s family includes his or her spouse and two children, dependent parents, and dependent brothers and sisters.
The Reason for the New Exemption Scheme
The government hopes to enhance consumer spending with this amendment. In a typical year, people might spend money on plane tickets, hotels, sightseeing, and local goods. Businesses, on the other hand, are cash-strapped as a result of the lockout. More revenue would flow to businesses if customers were encouraged to buy more to qualify for the exemption.
Conditions for Receiving the Benefit of the Cash Voucher Scheme’s Leave Travel Concession:
To be eligible for the encashment of the travel fare amount of the leave travel concession, an employee must meet the following conditions:
- Purchase goods and services worth three times the tax-free value by March 31, 2021.
- This amount must be spent on items incurring GST of 12% or more from a GST registered vendor or on digital purchases. This includes gadgets, washing machines, refrigerators, laptop computers, automobiles, and luxury items such as fragrances.
- GST invoices must be produced.
Which Employee Groups Are Eligible For This Modified Leave Travel Exemption?
- This scheme is open to all types of employees. Assuming they have the option of using Leave Travel Allowance.
- As a result, all employees in the private sector, as well as those working for Public Sector Undertakings, public banks, state governments, and the federal government, are eligible for the exemption.
- Employees are classified into three LTC categories under the scheme: those who travel by train for Rs 6,000 per person, those who travel by air for Rs 20,000 per person, and those who travel by air for Rs 36,000 per person.
How Much Can You Claim Under The Leave Travel Concession?
The fact that the company will reimburse the travel expenses does not imply that there is no maximum limit. The amount of travel expenditures is typically stipulated in the CTC. Furthermore, the exemption for travel expenses is based on actual expenses incurred. For example, in the case of plane travel, the reimbursed route is frequently the most cost-effective or shortest route.
In conclusion, the new Leave Travel Concession (LTC) tax laws provide an opportunity to maximise your tax savings throughout the holiday season. Employees can now claim a tax exemption on the money received in lieu of LTC if it is spent on certain expenses under the amended guidelines. To maximise this benefit, carefully plan your expenses, making sure they fall inside the relevant categories, such as purchasing products or services attracting a 12% or higher GST. Keep track of your receipts and keep sufficient documents to back up your claim. By making the most of the LTC tax exemption, you may maximise your tax savings while also making the most of the holiday season.