Tips on tax Exemption for LTC – This year budget has given the window for the Employees to avail exemption for leave travel concession (LTC) of one-third of specified expenditure or ₹36,000 whichever is less, for the block of 2018-21.
Income Tax Exemption for LTC will be provided only, if the employees have incurred expenditure on purchase of goods or services liable to GST at the rate of 12% or more. This is also mandatory to make the payment via non-cash mode i.e. only with Digital Mode and incurred during the period 12 October 2020 to 31 March 2021. The amendment is proposed to be for FY 2020-21 only.
Additionally, the government has proposed to tax the VPF contribution of more than Rs. 2,50,000. Interest income on own contributions made by an employee in excess of ₹2.5 lakh in a year on or after 1 April 2021 to provident fund is now taxable.
Currently, any accumulated balance is treated as tax exempt under provided the employee has rendered continuous service of five years or more.