Earnings-tax exemption for cost of deemed LTC fare for non-Central authorities workers | Private Finance Information

Income-tax exemption for payment of deemed LTC fare for non-Central government employees

New Delhi: In view of the COVID-19 pandemic and resultant nationwide lockdown in addition to disruption of transport and hospitality sector, as additionally the necessity for observing social distancing, quite a few workers aren’t capable of avail of Depart Journey Concession (LTC) within the present Block of 2018-21.

With a view to compensate Central authorities workers and incentivise consumption, thereby giving a lift to consumption expenditure, the Authorities of India allowed cost of money allowance equal to LTC fare to Central Authorities workers topic to fulfilment of sure situations vide OM No F. No 12(2)/2020-EII (A) dated twelfth October 2020.

It has additionally been offered that because the money allowance of LTC fare is in lieu of deemed precise journey, the identical shall be eligible for income-tax exemption on the strains of present income-tax exemption out there for LTC fare.

With a purpose to present the advantages to different workers (i.e. non-Central authorities workers) who aren’t lined by the above talked about OM, it has been determined to supply an analogous income-tax exemption for the cost of money equal of LTC fare to the non-Central Authorities workers additionally. Accordingly, the cost of money allowance, topic to a most of Rs 36,000 per particular person as Deemed LTC fare per particular person (Spherical Journey) to non-Central Authorities workers, shall be allowed income-tax exemption topic to fulfilment of situations laid out in para 4.

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The income-tax exemption to receipt of deemed LTC fare by a non-Central Authorities worker (‘the worker’) shall be allowed topic to fulfilment of the next situations:-

(a) The worker workouts an choice for the deemed LTC fare in lieu of the relevant LTC within the Block 12 months 2018-21.

(b) The worker spends a sum equals to a few instances of the worth of the deemed LTC fare on buy of products / companies which carry a GST price of not lower than 12% from GST registered distributors / service suppliers (‘the desired expenditure’) by digital mode through the interval from the twelfth of October, 2020 to thirty first of March, 2021 (‘specified interval’) and obtains a voucher indicating the GST quantity and the quantity of GST paid.

(c) An worker who spends lower than thrice of the deemed LTC fare on specified expenditure through the specified interval shall not be entitled to obtain full quantity of deemed LTC fare and the associated income-tax exemption and the quantity of each shall be diminished proportionately as defined in Instance-A beneath.

The DDOs shall permit income-tax exemption topic to fulfilment of the above situations after acquiring copies of invoices of specified expenditure incurred through the specified interval. Additional, as this exemption is in lieu of the exemption offered for LTC fare, an worker who has exercised an choice to pay revenue tax beneath concessional tax regime beneath part 115BAC of the Earnings-tax Act, 1961 shall not be entitled to this exemption.

The clarifications issued by the Division of Expenditure, Ministry of Finance for the Central Authorities workers vide OM F. No 12(2)/2020-EII (A) Dated twentieth October 2020 and subsequent clarification, if any, issued on this regard shall apply mutatis mutandis to non-Central Authorities workers additionally topic to fulfilment of situations specified within the previous paras.

The legislative modification to the provisions of the Earnings-tax Act, 1961 for this function shall be proposed in the end.


Deemed LTC Fare : Rs 20,000 x 4 = Rs 80,000

Quantity to be spent : Rs 80,000 x 3 = Rs 2,40,000

Thus, if an worker spends Rs. 2,40,000 or above on specified expenditure, he shall be entitled to full deemed LTC fare and the associated income-tax exemption. Nonetheless, if the worker spends Rs. 1,80,000 solely, then he shall be entitled to 75% (i.e. Rs. 60,000) of deemed LTC fare and the associated income-tax exemption. In case the worker already obtained Rs. 80,000 from an employer prematurely, he has to refund Rs. 20,000 to the employer as he may spend solely 75% of the required quantity.