Currently, the Income Tax Act gives a 2-year LTA (Leave Travel Allowance) window in a block of four years for availing the (LTA) concession. If this window is broadened with some control clauses inserted, it has the potential to divert a huge traffic of tourism to these regions in India and also contribute to their economic development. So, what will change in the new amendment if carried out w.e.f 1.2.2021 budget, can hold prospectively if specified blocks of LTC are introduced.
a) The LTA will be available for all four years in any of that specified block of years an assessee gets to choose during his Tax lifetime under this specified deduction (max four times as explained herewith). i.e., if an assessee has 10 years of service left or 10 years left to attain the age of 60 as a professional, he can get in one block of four years of his choice to make a minimum of three trips to JKL/NE in a block of four years within 10 years and avail the LTC deduction for all four years.
The assessee continues to get the usual deduction of LTA in another block of four years as usual under current tax laws, i.e., say Mr. A aged 51 chooses this in AY 21-22, he will have to complete all his travels to NE/JKL within AY 24-25.
He can avail of the usual deduction as of now from 25-26 to 30-31 or he can avail of the current scheme henceforth and plan the choice of the specified travel block in the next few assessment years for that one block remaining or completely disregard and exercise only deduction as of now.
Likewise, if an assessee is an employee or professional aged 25, he can get max four of the specified blocks in the span of 35 years (35 years of service or professional is considered between age 25 and age 60). If he is aged 35, then max three specified blocks, and if aged 45 and above then max two blocks and aged 50 and above then one block as explained above.
b) Professionals, besides the salaried class, will become entitled to choose a specified block of four years in their entire tax assessments to broaden the net and as above. The same rules as above will apply. The professionals will be only those in practice in Medicine, Law, CA, ICMA, CS, IRP, Chartered Engineers, Journalists, TV Media, and Architects i.e., those whose profession is regulated by a body or a guild formed for the purpose under Indian Acts.
c) The concession on travel - the fundamental principle is digital payments through Indian banking and payments banks/wallet system. The overall cap will be 15% of (base salary+ HRA) of any individual as maximum deduction under LTA under the specified scheme. JKL and Northeast will be referred to as specified regions under this deduction.
d) Travel - will be permitted for the entire end-to-end trip subject to the overall LTA claim within 15% limit as above if all payments are digital and through net banking, cards, or wallets.
e) Food and stay - will be allowed for the Journeys taken to specified region within 15% limit as above and similar through net banking, cards, and wallets.
If an assessee travels to any other region in India, the current rules will apply for that year. To qualify for the block, the assessee must travel at least three out of four years in that block to specified regions. The impact of the above clauses is the expenses people will incur while travelling to these regions, whereby the economies of these regions in India can flourish naturally and help government efforts to integrate as well as bring smiles and prosperity to these regions.
Please note that promoting near-shore tourism is the best way to promote India's integration index and also leads to cross-cultural interface besides boosting the economy. The incidental and indirect benefit is brought about by digital India and the widening of tax adherence in these regions as well as there will be an incentive of increased business to the hotels, restaurants, and taxi services in these regions. The controls to be kept to avoid misuse can also be kept to ensure a smooth migration to the specified block of LTC.
(The author is a CFO and finance specialist.)
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