Leave Travel Concession

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Leave Travel Concession

Leave travel concession is an allowance given by an employer to an employee for meeting travel expenses when the employee is on leave from work. Leave travel concession is tax-exempt under the Income Tax Act. The exemption is available only subject to the satisfaction of certain conditions. In this article, we discuss the exemption allowed by the Income Tax Act for leave travel concession.

Leave Travel Concession Eligibility

The value of leave travel concession received by an employee from an employer is entitled to income tax exemption when the employee and the employee’s family travel to any place in India during or after employment.

Amount of Exemption for Leave Travel Concession

The maximum exemption for leave travel concession should not exceed the actual expenditure incurred on the performance of the journey. Leave travel concession exemption is also only allowed in respect of travel fare. Expenses incurred on porterage, conveyance from residence to the place of origin of a journey performed during the course of employment or otherwise, boarding and lodging or other expenses incurred during the journey will not qualify for an exemption. In addition, the amount of exemption for leave travel concession is subject to the following:

Air Travel

When the travel is undertaken by an employee and his/her family, the maximum exemption allowed would be an amount not exceeding the air economy fare of the National Carrier by the shortest route to the place of destination.

Place of Origin & Destination Connected by Rail

If the place of origin of the journey and destination are connected by rail and the journey is performed by any mode of transport other than by air, then the maximum exemption will be limited to the cost for air-conditioned first-class rail fare by the shortest route.

Place of Origin & Destination NOT Connected by Rail

In case the place of origin of the journey and destination are not connected by rail, then the amount of exemption for leave travel concession would be as follows:

  • If a recognised public transport system exists, an amount not exceeding the 1st class or deluxe class fare on such transport by the shortest route.
  • If no recognised public transport system exists, an amount equivalent to the air-conditioned first-class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail.

Claiming Leave Travel Allowance

A taxpayer can claim leave travel concession for any two journeys in a block of 4 years. If the taxpayer has not availed the exemption for leave travel concession in a particular block, he can claim the exemption of the first journey in the calendar year immediately succeeding the end of the block of four calendar years. Hence, a maximum of one journey can be carried forward and that too only for the first journey in the following calendar year unless the period is extended. In case leave travel concession is encashed without performing the journey, the entire amount received by the employee would be taxable.

Family & Children

Leave travel concession can also be claimed with respect to the fare expenses incurred on behalf of family members and two children. Family for this purpose means:

  • Spouse and children of the employee. Upto two children of an individual after 1.10.1998. The rule limiting children will not apply for children born before 1.10.1998 and also in case of multiple births after one child.
  • Parents, brothers, sisters, who are wholly or mainly dependent upon the employee.

To know about the concept of Tax Audit Turnover in Income Tax, click here.

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