7th Pay Commission latest update: No need to pay Income Tax for availing THIS facility

After presenting the Union Budget 2021, Finance Minister Nirmala Sitharaman tabled the Finance Bill. The Modi government has now notified the Leave Travel Concession (LTC) cash Voucher scheme. In view of the situation arising out of outbreak of COVID pandemic, the government proposed to provide tax exemption to cash allowance in lieu of LTC. Under the existing provisions of the Act, it 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. 

The government has proposed to insert second provision, 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 employee exercises an option for the deemed LTC fare in lieu of the applicable LTC in the Block year 2018-21. 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.

The amount of exemption shall not exceed Rs 36,000 per person or one-third of specified expenditure, whichever is less.  

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