54. How exemption is to be allowed qua value of leave travel concession where employee is entitled to more than one LTC in a block of 4 years
Circular No. 413 was issued by the Central Board of Direct Taxes on 4 March 1985. Its subject is 54. How exemption is to be allowed qua value of leave travel concession where employee is entitled to more than one LTC in a block of 4 years.
This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.
Corrects the practice on leave travel concession where an employee gets more than one concession in a block of four calendar years. Section 10(5)(ii) exempts travel concession or assistance from an employer for the employee and his family in connection with proceeding on leave to any place in India, and from an employer or former employer in connection with proceeding to any place in India after retirement or termination, the proviso capping the exemption at the value of the concession for going to his home district except in the cases prescribed by rule 2B. Rule 2B specifies the concession availed of in each block of four calendar years starting from 1974, or where more than one is available in a block, the one first availed of, or, where none is availed in a block, the first one availed in the first calendar year of the next block. Income-tax Officers had been reading this as giving exemption for only one concession in the block and taxing the second entirely. The Board holds instead that the first concession in the block is fully exempt under rule 2B, and the second is exempt up to what would have been admissible had the employee gone to his home town; only the excess over the home town fare is a perquisite taxable as salary.
It was represented that Income-tax Officers were allowing exemption for a journey to a place other than the home town only once in a block of four years and denying any exemption for a second concession in the same block.
54. How exemption is to be allowed qua value of leave travel concession where employee is entitled to more than one LTC in a block of 4 years
1. Section 10(5 ) provides for grant of exemption from income-tax to the value of leave travel concession granted by an employer to an employee. In regard to assessment for the assessment years 1971-72 and onwards this concession is dealt with in section 10(5)( ii) which spells out two situations, the first is where an employee receives travel concession or assistance from his employer for himself and his family in connection with his proceeding on leave to any place in India. The second is where an employee receives travel concession or assistance from his employer or former employer for himself and his family in connection with his proceeding to any place in India after retirement from service or after the termination of his service. A proviso to this sub-clause spells out that the amount exempted under either of these situations shall not, except in the case of circumstances prescribed by rule 2B of the Income-tax Rules, exceed the value of the travel concession or assistance which would have been received by or due to the individual in connection with his proceeding to his home district in India on leave or, as the case may be, after retirement from service or on the termination of his service. Under rule 2B the following cases are specified as being exceptions to the ceiling laid down in the aforementioned proviso :
a. where the individual is entitled to such travel concession or assistance once in a block of four calendar years commencing from the calendar year 1974, the value of such travel concession or assistance availed of in each such block;
b. where the individual is entitled to such travel concession or assistance more than once in any such block of four calendar years, the value of the travel concession or assistance first availed of by him in each such block;
c. where such travel concession or assistance is not availed of by the individual during any such block of four calendar years, the value of the travel concession or assistance, if any first availed of by the individual during the first calendar year of the immediately succeeding block of four calendar years.
2. It has been represented that Income-tax Officers are interpreting section 10(5), read with rule 2B, to allow exemption in respect of leave travel concession for visiting any place in India other than the home town once in a block of four years and if more than one leave travel concession is allowed to an employee in this block, no exemption under section 10(5) in respect of the second concession is allowed. The Board have examined the matter. Under section 10(5 ), read with rule 2B, the value of leave travel concession is exempt completely in a block of four years. However, if the employee is entitled to more than one leave travel concession in a block of four years, then full exemption is to be given for the first concession under rule 2B and subsequent concession in the same block is limited to an amount that would have been admissible had the employee visited his home town. It is only the excess of the concession over the fare to the home town that has to be treated as perquisite and taxed as part of salary income in respect of the second leave travel concession for going to any place in India in the same block of four years.
Circular : No. 413 [F. No. 194/9/79-IT(A-I)], dated 4-3-1985.
A perquisite addition in a salary assessment, or an employer's short deduction order, where a second leave travel concession in the block was taxed in full.
An employee takes two leave travel concessions in the same block, the first to a hill station and the second, worth Rs. 6,000, to another place in India. The fare to his home town would have been Rs. 4,000. The first is fully exempt, and of the second only Rs. 2,000 is a perquisite taxable as salary.
Rules it names. Rule 2B of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.
Source: the Income Tax Department’s own published text — its page for this instrument.