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Save Tax with Leave Travel Allowance (LTA) under Section 10(5)
Every individual is tired of his routine and really in need of some break. Taking break after working for long time also adds to increased productivity. So the salaried person who is working round the year is surely deserves a break through long & short vacations keeping his work tensions aside. Hence this section entitles to exemption to employee in respect of the value or travel concession or assistance received by or due to him from his employer for himself and his family.
Leave Travel Allowance Exemption
The employee gets entitled for full exemption of Leave Travel Allowance in India only if:
- The amount spent on travel should be for self, family, wife , maximum of two children, brother, sister and any other person who is dependent upon you
- The LTA exemption is permitted only for travel within India by any mode of transportation i.e rail, air, train
- The travel expenses considered for LTA claim is for the shortest route. In case of air travel, the economy class air fare prices are taken into consideration
Leave Travel Concession Rules
Lets understand LTA exemption rules. Exemption in India shall be allowed subject to following:
- If the journey is performed by Air – Exemption of an amount not exceeding the air economy fair of the National carrier by the shortest route to the destination.
- If places of origin of journey and destination are connected by rail and the journey is performed by any mode other than by air – Exemption of an amount not exceeding the air conditioned first class rail fair by the shortest route to the destination.
- If the places of origin of journey and destination are not connected by rail and the journey is performed by the recognized public transport then the exemption of an amount not exceeding 1st class or deluxe class fare on such transport by the shortest route to the destination. If no recognized public transport system exist then the amount of exemption will be air conditioned first class rail fare by the shortest route to the destination as if journey has been performed by rail.
Restriction for claiming an exemption and carry forward:
LTA Exemption in India can be claimed for two journeys in a block of 4 years. If the assessee is not availing the exemption in any particular block whether for both journey or for one journey, he can carry forward only 1st journey and should claim exemption in the first year of the next block of 4 years. So in succeeding block he can take exemption for 3 journeys. Govt has defined these blocks as 4 calendar years. First block was 1986-1989 continuing these blocks we are into now 2010-2013 block.
Exemption in respect of fare is only allowed and no any other expenses. Family includes spouse and children of the employee and dependent parents, brothers and sisters. If spouse is also working then both husband and wife can claim LTA by that a family can claim 4 times exemption in the block of 4 years, 2 by husband and rest 2 by wife!
Leave Travel Allowance Calculation with Example
Let’s understand leave travel allowance calculation with the help of example.
If Mr & Mrs Vyas traveling to Pune from Bangalore but instead of going directly to Pune, they went Bangalore to Chadhigarh and then from Chandigarh to Pune.
The cost of Ac 3 tier tickets are as follows.
Bangalore – Chandigarh : Rs 1000
Chandigarh – Pune : Rs 800
Pune – Chandigarh : Rs.800
Chandigarh – Bangalore : Rs1000
So total amount Mr Vyas spending here is 7200 for 2 people.
Now AC first class ticket from Bangalore to Pune costs Rs 2500 per head
So the round trip would cost Mr Vyas Rs.10000 in case they travel together. So in this particular case though Mr Vyas haven’t traveled through the shortest distance he can claim full exemption of Rs. 7200 because amount spent by them is less than Ac first class fare by the shortest route.
If Mr Vyas got Rs.12000 as LTA, would it be fully exempt?? The answer would be No because as we saw exemption would be for the lesser of the amount and the fare as defined. So exemption in this case would be Rs.7200 and rest Rs. 4800 will be chargeable to tax.
What happens when both Spouses get LTA
When both husband and wife are working professionals and both of them receive LTA, both of them can claim Leave Travel Allowance (LTA) as per Income Tax Rules. Each spouse husband or wife can claim LTA twice in the block of four years but they both can’t claim Leave Travel Allowance exemption for the same journey.
How to claim LTA Exemption
From now onwards, there is no obligation on the part of the employee to collect evidence for bills of travel and submitting it to the taxation authorities. You can claim LTA exemption only upto the extent of your LTA eligibility. If you have a LTA exemption limit of Rs 25,000 then the maximum exemption permitted to you is Rs 25,000. Now even if you spend Rs 30,000 on your journey, you won’t get a exemption of more than Rs 25,000. Similarly, if you are spending a lesser amount than your actual exemption limit, even then you would be taxed accordingly for the remaining amount. Income Tax Department of India permits only domestic air fare for Leave Travel Concession exemption
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