CBDT vide Notification No. 50/2021 dated 5.5.2021 through Income tax (15th Amendment), Rules, 2021 notifies Rule 2B(1A) and (1B) for cash allowance in lieu of LTC or LTA for the Assessment Year beginning from April 1, 2021. The exemption for LTA is given under section 10(5) of the Income-tax Act, 1961 read with Rule 2B.
On 12th October, 2020, the Finance Minister had announced the Leave Travel Concession (LTC) Cash Voucher Scheme for central government employees. Later on, the scheme was extended to non-central government employees to include state government employees, private sector employees, etc.
An employee, opting for this scheme, will be required to buy goods/services worth 3 times the fare and 1 time the leave encashment before 31st March 2021.
The scheme also requires that money must be spent on goods attracting GST of 12% or more from a GST registered vendor through digital mode. The employee is required to produce a GST invoice to avail the benefit.
The LTC cash voucher scheme was introduced by the government in order to boost consumption in lieu of actual travel.
This exemption from LTA was allowed by way of a press release dated 29.10.2020. The legislative amendment for provisioning income-tax exemption under LTA Cash Voucher Scheme was later on made through Finance Act, 2021.
The amendment provides 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, such individual shall also be exempt under this clause subject to the fulfillment of such conditions (including the condition of incurring such amount of such expenditure within such period), as may be prescribed.
Now, the CBDT has prescribed the conditions for availing the exemption for LTC without actual travel by incurring the expenditure on eligible goods or services.
The period for which the expenditure was required to be incurred for availing the exemption under section 10(5) was already expired on March 31, 2021. However, the government was releasing Office Memorandums (OM) and clarifications before 31st March specifying the conditions for availing such exemption in lieu of actual travel. The CBDT notification has adopted those conditions and are in line with the OMs issued by the government earlier.
For this purpose, two new sub-rules (1A) and (1B) are inserted in Rule 2B which read as below-
(1A) For the assessment year beginning on the 1st day of April, 2021, where the individual referred to in sub-rule (1) avails any cash allowance from his employer in lieu of any travel concession or assistance, the amount exempted under the second proviso to clause (5) of section 10 shall be the amount, not exceeding thirty-six thousand rupees per person, for the individual and the member of his family, or one-third of the specified expenditure, whichever is less, subject to fulfilment of the following conditions, namely:-
(i) the individual has exercised an option to avail exemption under the second proviso of clause (5) of section 10, in lieu of the exemption under clause (5) of section 10 in respect of one unutilised journey during the block of four calendar years commencing from the calendar year 2018;
(ii) the payment in respect of the specified expenditure is made by the individual or any member of his family to a registered person during the specified period;
(iii) the payment in respect of the specified expenditure is made by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under rule 6ABBA; and
(iv) the individual obtains a tax invoice in respect of specified expenditure from the registered person referred in clause (ii).
Explanation 1- For the purpose of this sub-rule,-
(i) “tax invoice” means an invoice issued by the registered person under section 31 of the Central Goods and Services Tax Act, 2017 (No. 12 of 2017);
(ii) “registered person” shall have the meaning assigned to it in clause (94) of section 2 of the Central Goods and Services Tax Act, 2017 (No. 12 of 2017);
(iii) “specified expenditure” means expenditure incurred by an individual or a member of his family during specified period on goods or services, which are liable to tax at an aggregate rate of twelve per cent. or above under various Goods and Services Tax (GST) laws and goods are purchased or services procured from GST registered vendors or service providers;
(iv) “specified period” means the period commencing from the 12th day of October, 2020 and ending on the 31stday of March, 2021.
Explanation 2 For the removal of doubt, it is hereby clarified that if the amount received by or due to an individual, as per the terms of his employment, from his employer in relation to himself and member of his family, in connection with the specified expenditure is in excess of the thirty six thousand rupees per person, for the individual and the member of his family, the exemption under this sub-rule would be restricted to thirty-six thousand rupees per person, for the individual and the member of his family, or one-third of the specified expenditure, whichever is less.
Explanation 3 It is hereby clarified that the clarification issued by the Department of Expenditure, Ministry of Finance, vide OM F. No 12(2)/2020-EII (A) Dated 12th October, 2020 and any subsequent clarifications, if any, issued in this regard shall apply mutatis mutandis to the exemption under this sub-rule.
It is further provided in sub-Rule (1B) that where an exemption under the second proviso to clause (5) of section 10 is claimed and allowed, sub-rule (2) shall have effect as if for the words “two journeys” , the words “one journey” has been substituted.
It should be noted that if an individual opts for new tax regime under section 115BAC then he/she cannot be eligible to claim any exemption under section 10(5) for LTC.
Read the full text of Notification No. 50/2021 dated 5-5-2021 on Rules for LTC Cash Voucher Scheme
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 5th May, 2021
(INCOME-TAX)
G.S.R. 320(E).—In exercise of the powers conferred by clause (5) of section 10 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct taxes hereby makes the following rules further to amend the Income-tax Rules,1962, namely:─
1. Short title and commencement.- (1) These rules may be called the Income tax (15th Amendment), Rules, 2021.
(2) They shall be deemed to have come into force from the 1st day of April, 2021.
2. In the Income-tax Rules, 1962, in rule 2B, after sub-rule (1), the following sub-rules shall be inserted, namely:—
“(1A) For the assessment year beginning on the 1st day of April, 2021, where the individual referred to in sub-rule (1) avails any cash allowance from his employer in lieu of any travel concession or assistance, the amount exempted under the second proviso to clause (5) of section 10 shall be the amount, not exceeding thirty-six thousand rupees per person, for the individual and the member of his family, or one-third of the specified expenditure, whichever is less, subject to fulfilment of the following conditions, namely:-
(i) the individual has exercised an option to avail exemption under the second proviso of clause (5) of section 10, in lieu of the exemption under clause (5) of section 10 in respect of one unutilised journey during the block of four calendar years commencing from the calendar year 2018;
(ii) the payment in respect of the specified expenditure is made by the individual or any member of his family to a registered person during the specified period;
(iii) the payment in respect of the specified expenditure is made by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under rule 6ABBA; and
(iv) the individual obtains a tax invoice in respect of specified expenditure from the registered person referred in clause (ii).
Explanation 1- For the purpose of this sub-rule,-
(i) “tax invoice” means an invoice issued by the registered person under section 31 of the Central Goods and Services Tax Act, 2017 (No. 12 of 2017);
(ii) “registered person” shall have the meaning assigned to it in clause (94) of section 2 of the Central Goods and Services Tax Act, 2017 (No. 12 of 2017);
(iii) “specified expenditure” means expenditure incurred by an individual or a member of his family during specified period on goods or services, which are liable to tax at an aggregate rate of twelve per cent. or above under various Goods and Services Tax (GST) laws and goods are purchased or services procured from GST registered vendors or service providers;
(iv) “specified period” means the period commencing from the 12th day of October, 2020 and ending on the 31stday of March, 2021.
Explanation 2 For the removal of doubt, it is hereby clarified that if the amount received by or due to an individual, as per the terms of his employment, from his employer in relation to himself and member of his family, in connection with the specified expenditure is in excess of the thirty six thousand rupees per person, for the individual and the member of his family, the exemption under this sub-rule would be restricted to thirty-six thousand rupees per person, for the individual and the member of his family, or one-third of the specified expenditure, whichever is less.
Explanation 3 It is hereby clarified that the clarification issued by the Department of Expenditure, Ministry of Finance, vide OM F. No 12(2)/2020-EII (A) Dated 12th October, 2020 and any subsequent clarifications, if any, issued in this regard shall apply mutatis mutandis to the exemption under this sub-rule.
(1B) Where an exemption under the second proviso to clause (5) of section 10 is claimed and allowed, sub-rule (2) shall have effect as if for the words „two journeys‟ , the words „one journey‟ has been substituted.”.
[Notification No. 50/2021/F. No.370142/14/2021-TPL]
KAMLESH CHANDRA VARSHNEY, Jt. Secy. (Tax Policy and Legislation)
Explanatory Memorandum: It is hereby certified that no person is being adversely affected by giving retrospective effect to these rules.
Note: The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub-section (ii) vide number S.O. 969 (E), dated the 26th March, 1962 and last amended vide notification number G.S.R. 318(E) dated 4th May, 2021.
Download Copy of Notification No. 50/2021 dated 5-5-2021 on Rules for LTC Cash Voucher Scheme in pdf format
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