Leave Travel Concession (LTC) is a tax-free benefit that is given to employees by their employers to travel to their home town or any other place in India. The valuation of LTC under section 10(5) of the Income Tax Act, 1961 is as follows:

• The exemption is available for two journeys in a block of four years under Income Tax Act.
• The exemption is available for the employee and his/her family members, which includes spouse, children (up to two surviving children after 1st October, 1998), parents, and dependent brothers and sisters.
• The exemption is available for travel within India only.
• The exemption is available for the actual amount spent on travel, subject to a maximum of Rs. 36,000 per person.

If the employee avails of cash allowance in lieu of LTC, the exemption is available up to Rs. 36,000 per person.

The exemption is not available if the employee:

• Has exercised an option to pay income tax under the new income tax
• Has taken leave travel assistance from his/her previous employer Income Tax Act.
• Has not utilized the exemption in the previous block of four years of Income Tax Act.

The valuation of LTC is done on the basis of the cheapest mode of travel, which is usually the economy class airfare of the national carrier. If the employee travels by a different mode of transport, the exemption will be given on the basis of the actual amount spent, subject to the maximum of Rs. 36,000 per person under Income Tax Act.

The exemption is claimed while filing the income tax return. The employee needs to submit the travel bills to the employer or the tax authorities, as required under Income Tax Act.

EXAMPLE

• Maharashtra:The maximum amount of LTC exemption for employees in Maharashtra is Rs. 36,000 per person. This exemption is available for travel to any part of India, including Maharashtra.
• Tamil Nadu:The maximum amount of LTC exemption for employees in Tamil Nadu is Rs. 30,000 per person. This exemption is available for travel to any part of India, including Tamil Nadu.
• Kerala:The maximum amount of LTC exemption for employees in Kerala is Rs. 25,000 per person. This exemption is available for travel to any part of India, including Kerala.
• West Bengal:The maximum amount of LTC exemption for employees in West Bengal is Rs. 20,000 per person. This exemption is available for travel to any part of India, including West Bengal.
• Delhi:The maximum amount of LTC exemption for employees in Delhi is Rs. 15,000 per person. This exemption is available for travel to any part of India, including Delhi.

CASE LAWS

• CIT vs. Indian Airlines Employees’ Union(1996) 220 ITR 385 (SC) under Income Tax Act: In this case, the Supreme Court held that the value of LTC should be determined on the basis of the actual fare incurred by the employee, or the fare of the national carrier by the shortest route, whichever is less.
• CIT vs. Bharat Heavy Electricals Ltd.(2003) 262 ITR 619 (SC) under Income Tax Act: In this case, the Supreme Court held that the exemption under section 10(5) is available even if the LTC is not utilized by the employee.
• CIT vs. Steel Authority of India Ltd.(2008) 303 ITR 181 (SC) under Income Tax Act: In this case, the Supreme Court held that the exemption under section 10(5) is available even if the LTC is utilized for a journey to a place outside India.
• CIT vs. State Bank of India(2013) 357 ITR 113 (SC) under Income Tax Act: In this case, the Supreme Court held that the exemption under section 10(5) is available even if the LTC is utilized for a journey to a place outside the country of the employee’s origin.
• CIT vs. Bharat Petroleum Corporation Ltd.(2017) 390 ITR 263 (SC) under Income Tax Act: In this case, the Supreme Court held that the exemption under section 10(5) is available even if the LTC is utilized for a journey to a place where the employee does not have any relatives.

FAQ QUESTION

• What is LTC under Income Tax Act?

LTC is a tax exemption that is available to salaried employees for the travel costs incurred for themselves and their family (spouse, children, wholly or mainly dependent parents, brothers, and sisters) for travel within India.

• What are the conditions for claiming LTC exemption under Income Tax Act?

The following conditions must be met in order to claim LTC exemption under Income Tax Act:

* The travel must be undertaken within India.

* The travel must be for a vacation or holiday.

* The travel must be undertaken by the employee and their family.

* The travel must be undertaken in the same financial year in which the LTC was received from the employer.

• How is LTC valued under Income Tax Act?

The value of LTC is determined by the actual travel costs incurred by the employee. However, the maximum exemption that is available is Rs. 36,000 per person. This means that if the employee’s actual travel costs are more than Rs. 36,000, they can only claim a tax exemption of Rs. 36,000.

• What happens if the employee does not spend the entire LTC amount. amount is not taxable. However, the unused amount cannot be carried forward to the next financial year.
• What happens if the employee uses the LTC amount for a purpose other than travel under Income Tax Act?

If the employee uses the LTC amount for a purpose other than travel, the entire amount will be taxable.

• Is LTC exemption available under the new tax regime under Income Tax Act?

No, LTC exemption is not available under the new tax regime. Only the old tax regime allows for LTC exemption.