Finance Bill 2021 - 6. Leave Travel Concession allowed even if not travelled during Covid-19, subject to certain conditions - Proposed amendment

Leave Travel Concession allowed even if not travelled due to Covid-19, subject to certain conditions.

Source: The Income Tax Act, 1961, the Finance Bill 2021 and the memorandum to the Finance Bill, 2021.

Introduction

Dear Friends, 

In relation with the Leave travel concession which is allowed by some organisation to its employees, the same is  is exempt under section 10(5) of the Income Tax Act, 1961 ('the Act'); subject to the conditions and limits prescribed therein.

If we have a look at the Financial year 2020-21 (i.e. from 1st April 2020 to 31 March 2021); most part of the year was under the Lockdown Spell, which was announced to contain the spread of Corona Virus. 

There can be various situations, wherein the employee may avail the said LTC based on the policies of individual organisation; the same not being possible due to the Covid-19 Pandemic.

Amendment proposed by the Finance Bill, 2021.

The Finance Bill, 2021 acknowledges the fact and has introduced new provisions wherein the any amount received under LTC or any other assistance received by the Assessee / employee shall also be exempt under the said section 10(5). The highlights of the amendment are as below;

• The exemption is applicable only for AY 2021-22; the applicable block of four calendar years is 2018-2021
• Exemption is allowed for any value received under LTC or any amount of assistance received
• The amount of exemption is least of the following
• Rs. 36,000/- per person
• one third of the 'specified expenditure' incurred during the 'Specified period'
• Amount of assistance received by the employee from the employer
• Specified expenditure pertains to expenses by an individual / family member (spouses, children and other dependents which consists of Father, mother and siblings) on goods / services which are liable to GST at aggregate rate of 12% or more and is purchased from GST Vendors/service providers
• Specified period refers to 12 October 2020 to 31 March 2021
• The payment of such expenditure is made by way of Account payee cheque drawn / Electronic clearing system or other modes as prescribed under rule 6ABBA, and tax inovice is obtained from such vendor

Further it would be very relevant to keep a watch on the further rules which may be prescribed therein. As such only the above details are available.