Section 10(5) of the Income Tax Act deals with Exemption on Leave Travel Concession. Section 10(5) has very limited scope in Income Tax Act. One important point here is that, the exemption under section 10(5) can be claimed not only on travel by the Assessee, but also on travel by his family. Section 10(5) specifies the travel period of 4 years, which is explained below. In this article, we will cover everything you may need to know about Section 10(5) of Income Tax Act, Eligibility, Exemption Limit etc.
Scope of Section 10(5)
The value of any travel Concession or assistance provided by the employer or the former employer to an assessee for himself and his family in connection with his proceeding to any place in India on leave or after retirement from service or after termination of his service is exempt subject to such conditions as may be prescribed having regard to travel concession or assistance granted to the employees of the Central Government.
Max Exemption Amount u/s 10(5)
Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel.
Who can avail Section 10(5) Exemption on Leave Travel Concession
The exemption is admissible in respect of actual expenditure incurred for journeys performed not only by himself (assessee) but also by his family.
For the purpose of section10(5)(b) “family” means:
- the spouse and children of the individual; and
- the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on him.
Value of Leave Travel Concession under section 10(5)
Rule 2B, provides that the value of travel concession or assistance received by or due to the individual from his employer or former employer for himself and his family, in connection with his proceeding:
- on leave to any place in India;
- to any place in India after retirement from service or after the termination of his service.
Block of Years under section 10(5)
The exemption can be availed only in respect of two journeys performed in a block of four calendar years. For this purpose, first four year block commenced from calendar year 1986 and the blocks work out as 1986-89, 1990-93, 1994-97, 1998-2001 and so on. Also Read Section 80TTA of Income Tax Act.
What if the concession u/s 10(5) not availed during that 4 year period
If travel concession or assistance is not availed during any of the four year block period, exemption can be claimed provided he avails the concession or assistance in the calendar year immediately following that block. This is popularly known as the ‘carry-over’ concession. In such cases, the exemption so availed will not be counted for purposes of regulating the future exemptions allowable for the succeeding block of four years.
Quantum of Exemption – Section 10(5) IT Act
Quantum of exemption is limited to the actual expenses incurred on the journey, i.e. without performing any journey and incurring expenses thereon, no exemption can be claimed.
Quantum of exemption is however subject to the following limits, depending upon the mode of transport used or available.
1. For journey performed by air, air economy fare of the national carrier (Indian Airlines or Air India) by the shortest route to the place of destination.
2. Where place of origin of journey and destination are connected by rail and the journey is performed by any mode of transport other than by air, air-conditioned first class rail fare by the shortest route to the place of destination.
3. Where place of origin of journey and destination or part thereof are not connected by rail, the maximum amount shall be :
- where a recognised public transport system exists, the first class or deluxe class fare on such transport by the shortest route to the place of destination.
- where no recognised public transport system exists, the air- conditioned first class rail fare, for the distance of the journey by the shortest route as if the journey has been performed by rail.