Note on deemed Leave Travel Concession (‘LTC’) Fare for non-Central Government Employees
- Central Board of Direct Taxes (‘CBDT’) vide press release dated 29 Oct 2020 extended the benefit of deemed LTC fare for non-Central Government employees (originally announced for Government employees vide OM No F. No 12(2)/2020-EII (A) dated 12th October 2020); however CBDT did not issue any notification to give effect to the above press release. Now, CBDT vide circular no 20/2020 dated 03rd December 2020 has given clarity that the benefit of exemption of deemed LTC fare can be given by the employer while computing tax deduction at source on Salaries for the FY 2020-21. It is further clarified in the Finance Bill 2021 that the employee can claim benefit of such scheme in FY2020-21.
- Objective of LTC Scheme is to allow income-tax exemption to those employees who are not able to claim LTC exemption because of disruption of transport and hospitality services in Covid-19 situation in the current block of the calendar year 2018-2021 (i.e. 01 January 2018 to 31 December 2021).
- Maximum benefit available under deemed LTC fare scheme is ₹36000 per person (round trip).
-
Income-tax exemption for deemed LTC fare is available on fulfillment of following conditions:
- Employee to exercise option of deemed LTC fare in lieu of eligible LTC amount for the block years of 2018-21.
- Employee to spend a sum equal to three times of the value of deemed LTC fare on purchase of goods/services, during the period from 12 October 2020 to 31 March 2021, having GST rate of not less than 12%, from a GST registered vendors/service providers.
- Payment of purchase of goods/services should be through digital mode and employee to obtain a voucher indicating GST number and the amount of GST paid.
- In case such spend is less than three times of the deemed LTC fare, amount of deemed LTA fare shall be reduced proportionately.
- Employees who have opted concessional tax regime under section 115BAC of the Act shall not be entitled for above scheme.
- Employee already claimed LTC exemption twice from 01 January 2018 till date shall not be entitled for above scheme.
| Example 1 | |||
|---|---|---|---|
| If deemed LTC claimed by employee for himself and three family members (total 4 persons) | |||
| Amount (₹) | |||
| LTC entitlement of an employee as per GHRP system | A | 100000 | |
| Maximum limit of Deemed LTC fare as per notification issued by Ministry of Finance (4*36000) | B | 144000 | |
| Maximum exemption available to employee (lower of A and B) | C | 100000 | |
| Amount to be spent by employee in a specified period (i.e. from 12/10/2020 to 31/03/2021) to claim maximum exemption | D = (C*3) | 300000 | |
| Scenario-1 : LTC exemption if employee spends ₹300000 | 100000 | ||
| Scenario-2 :LTC exemption if employee spends less than ₹300000 (say ₹150000) – to be calculated on prorate basis [(100000)*(150000/300,000)] | 50000 | ||
| Example 2 | |||
|---|---|---|---|
| If deemed LTC claimed by employee for himself and one family member* (total 2 persons) | |||
| Amount (₹) | |||
| LTC entitlement of an employee as per GHRP system | A | 100000 | |
| Maximum limit of Deemed LTC fare as per notification issued by Ministry of Finance (2*36,000) | B | 72000 | |
| Maximum exemption available to employee (lower of A and B) | C | 72000 | |
| Amount to be spent by employee in a specified period (i.e. from 12/10/2020 to 31/03/2021) to claim maximum exemption | D = (C*3) | 216,000 | |
| Scenario-1 : LTC exemption if employee spends ₹216000 | 72000 | ||
| Scenario-2: LTC exemption if employee spends less than ₹216000 (say ₹150000) – to be calculated on prorate basis [(72000)*(150000/216000)] | 50,000 | ||
‘Person’ includes the employee himself / herself and his / her family. Per section 10(5) of the Income-tax Act, the term "family" means (i) the spouse and children of the employee; and (ii) the parents, brothers and sisters of the employee or any of them, wholly or mainly dependent on the employee
