Section 10 13A of the Income Tax Act, 1961, deals with the tax treatment of leave travel concession (LTC) or leave travel allowance (LTA) received by employees from their employer. This provision aims to provide relief to employees who incur travel expenses while on leave.
Under Section 10 13A, the value of LTA or LTC received by an employee is exempt from tax, subject to certain conditions. The exemption is available only in respect of travel expenses incurred by the employee and his/her family within India.
Here are the key features of Section 10 13A:
- Conditions for claiming the exemption:
To claim the exemption under Section 10 13A, the following conditions must be met:
- The employee must be on leave from his/her employment.
- The LTA or LTC must be received from the employer.
- The amount received must be used by the employee to meet the travel expenses incurred by him/her and his/her family members in India.
- The travel must be undertaken during the specified period.
- The employee must submit proof of travel to the employer to claim the exemption.
- Exemption limit:
The exemption under Section 10 13A is limited to the amount actually received by the employee from the employer for the purpose of travel. If the amount received is more than the actual travel expenses incurred, the excess amount will be taxable as per the employee’s income tax slab.
- Specified period:
The travel must be undertaken during the specified period, which is different for different taxpayers. For salaried employees, the specified period is the block of four years, as notified by the government from time to time. Currently, the block for the period 2018–2021 is in operation. For self-employed individuals, the specified period is the financial year in which the amount is received.
- Proof of travel:
To claim the exemption under Section 10 13A, the employee must submit proof of travel to the employer. This can be in the form of travel tickets, boarding passes, hotel bills, etc. The proof should clearly indicate the name of the employee and his/her family members, the destination, the dates of travel, and the amount spent on travel.
- Definition of family:
For the purpose of Section 10 13A, the term ‘family’ includes the spouse, children, and dependent parents, brothers, and sisters of the employee.
- Mode of travel:
The mode of travel is not relevant for claiming the exemption under Section 10 13A. It can be through any mode of transportation, such as air, rail, or road.
- Carry forward of LTA:
If an employee is unable to use the LTA in a particular block of four years, it can be carried forward to the next block. However, the exemption will be available only for the first year of the next block. Any unutilized LTA remaining after the first year will be taxable.
- Taxability of LTA:
If the employee does not satisfy the conditions mentioned in Section 10 13A, the LTA received by the employee will be taxable as per the employee’s income tax slab.
- Multiple LTA:
If an employee receives multiple LTA in a financial year, only one can be claimed as exempt. The employee can choose which LTA to claim as exempt.
- Tax implications for employer:
The LTA paid by the employer is allowed as a deduction while calculating the taxable income of the employer.
In conclusion
Section 10 13A provides a significant tax benefit to employees who incur travel expenses while on leave. Employers can use this provision to incentivize employees to take leave and spend time with their families. It is important for employees to maintain proper documentation to claim the exemption, and for employers to ensure that the LTA paid is in compliance with the provisions of the Income Tax Act.
Frequently Asked Questions (FAQs)
Q. What is Section 10 13A of the Income Tax Act?
Section 10 13A of the Income Tax Act provides a tax exemption for leave travel concession or allowance received by employees from their employer, subject to certain conditions.
Q. Who can claim the exemption under Section 10 13A?
The exemption under Section 10 13A is available to employees who receive LTA or LTC from their employer.
Q. What are the conditions for claiming the exemption under Section 10 13A?
To claim the exemption under Section 10 13A, the following conditions must be met:
- The employee must be on leave from his/her employment.
- The LTA or LTC must be received from the employer.
- The amount received must be used by the employee to meet the travel expenses incurred by him/her and his/her family members in India.
- The travel must be undertaken during the specified period.
- The employee must submit proof of travel to the employer to claim the exemption.
Q. What is the exemption limit under Section 10 13A?
The exemption under Section 10 13A is limited to the amount actually received by the employee from the employer for the purpose of travel.
Q. What is the specified period for claiming the exemption under Section 10 13A?
The specified period for claiming the exemption under Section 10 13A is different for different taxpayers. For salaried employees, the specified period is the block of four years, as notified by the government from time to time. For self-employed individuals, the specified period is the financial year in which the amount is received.
Q. What is the proof required for claiming the exemption under Section 10 13A?
To claim the exemption under Section 10 13A, the employee must submit proof of travel to the employer. This can be in the form of travel tickets, boarding passes, hotel bills, etc.
Q. What is the definition of family for claiming the exemption under Section 10 13A?
For the purpose of Section 10 13A, the term ‘family’ includes the spouse, children, and dependent parents, brothers, and sisters of the employee.
Q. Can an employee carry forward unutilized LTA to the next block of four years?
Yes, if an employee is unable to use the LTA in a particular block of four years, it can be carried forward to the next block. However, the exemption will be available only for the first year of the next block.
Q. What is the tax implication for an employer in the case of LTA paid to an employee?
The LTA paid by the employer is allowed as a deduction while calculating the taxable income of the employer.
Q. What happens if an employee does not satisfy the conditions mentioned in Section 10 13A?
If the employee does not satisfy the conditions mentioned in Section 10 13A, the LTA received by the employee will be taxable as per the employee’s income tax slab.
