Budget 2021-22 + FINANCE Bill, 2021

Tax Incentives

Exemption for LTC Cash Scheme

Under the existing provisions of the Act, clause (5) of section 10 of the Act provides for exemption in respect of the value of travel concession or assistance received by or due to an employee from his employer or former employer for himself and his family, in connection with his proceeding on leave to any place in India. In view of the situation arising out of outbreak of COVID pandemic, it is proposed to provide tax exemption to cash allowance in lieu of LTC.

Hence, it is proposed to insert second proviso in clause 5 of section 10, so as to provide that, for the assessment year beginning on the 1st day of April, 2021, the value in lieu of any travel concession or assistance received by, or due to, an individual shall also be exempt under this clause subject to fulfilment of conditions to be prescribed. It is also proposed to clarify by way of an Explanation that where an individual claims and is allowed exemption under the second proviso in connection with prescribed expenditure, no exemption shall be allowed under this clause in respect of same prescribed expenditure to any other individual.

The conditions for this purpose shall be prescribed in the Income-tax Rules in due course and shall, inter alia, be as under:

(a) The employee exercises an option for the deemed LTC fare in lieu of the applicable LTC in the Block year 2018-21;

(b) “specified expenditure” means expenditure incurred by an individual or a member of his family during the specified period on goods or services which are liable to tax at an aggregate rate of twelve per cent or above under various GST laws and goods are purchased or services procured from GST registered vendors/service providers;

(c) “specified period” means the period commencing from 12th day of October, 2020 and ending on 31st day of March, 2021;

(d) the amount of exemption shall not exceed thirty-six thousand rupees per person or one-third of specified expenditure, whichever is less;

(e) the payment to GST registered vendor/service provider is made by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under Rule 6ABBA and tax invoice is obtained from such vendor/service provider;

(f) If the amount received by, or due to an individual as per the terms of his employment, from his employer in relation to himself and his family, for the LTC is more than what is allowable to such person under the above discussed provisions, the exemption under the proposed amendment would be available only to the extent of exemption admissible under above listed provisions.

This amendment will take effect from 1st April, 2021 and will, apply in relation to the assessment year 2021-2022 only.

[Clause 5]

 

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Full Text:

Budget 2021-22 + FINANCE Bill, 2021

LTC cash exemption allowed for prescribed consumer expenditures subject to GST, electronic payment and receipt conditions. A new proviso to clause (5) of section 10 will exempt cash allowances in lieu of LTC for the assessment year beginning 1 April 2021, subject to conditions: option for deemed LTC fare for the 2018-21 block; specified expenditure on goods or services taxed at an aggregate GST rate of twelve percent or more from GST-registered vendors during the specified period; payment via prescribed account-payee or electronic modes with tax invoice; an exemption cap per person limited to the lesser of a fixed ceiling or one-third of specified expenditure; and coordination with employer-provided amounts.