Claiming LTA during FY 2020-21

We can claim LTA without actual travel. Yes, you heard it right!!

Many of us have not been on travel due to the pandemic. But we can still claim the LTA for the financial year 2020-21. Here is how.....

Let us first understand the provisions under Section 10(5) of Income Tax Act,1961 relating to claiming Leave Travel allowance exemption by an employee.

An employee is allowed tax exemption on the travel allowance received as part of salary. 

Conditions:

• Travel should be domestic.
• Travel cost of self,spouse,2 dependent children, dependent parents,sisters and brothers will alone be allowed.
• Travel can be done through air,rail or road.
• Expenses relating to sightseeing, food, accommodation etc CANNOT be claimed.
• Travel expenses of any 2 journeys performed during the block of 4 calendar years can be claimed as deduction. Current block is 2018-2021.
• In case of underutilized LTA during a calendar year,  the unveiled LTA can be carried forward to next block and can be utilized in the first calendar year of the succeeding block.
• In case of multi-destination journey in a single vacation, travel costs from place of origin to the farthest place in the vacation by the shortest possible route can be claimed as deduction.
• Amount of LTA deduction is always restricted to the Leave Travel Allowance being part of the salary.
• LTA deduction can be claimed only once during a calendar year. Hence, claim the travel journey with highest expense during that calendar year.

Relief to employees to claim LTA even without actual travelling through CASH ALLOWANCE SCHEME(CLS)

This looks more interesting now. During the pandemic, Government gave relaxation to the employees to claim LTA even without actual travel.

Conditions to claim LTA without actual travel during the financial year 2020-21 are:

1. Employee or his family( definition of family shall be spouse,2 dependent children, dependent parents,sisters and brothers) shall spend money on purchase of goods or services.
2. Amount of such purchase shall be 3 times the amount of leave entitlement. If such purchases are less than 3 times the Leave Travel allowance, then deduction shall be given proportionately.
3. Purchase of goods shall be supported by a GST bill.
4. Goods and services in the ambit of 12% or higher rate alone are eligible for claiming the LTA deduction.
5. Purchase of goods or services is made through digital mode.
6. Original copy of tax invoice shall be submitted to the employer.
7. For financial year 2020-21, expenditure should have been incurred between October 12,2020 and March 31,2021.

During Budget 2021, FM proposed to extend the CLS scheme for the financial year 2021-22.