What is Leave Travel Allowance?
Leave Travel Allowance (LTA) is the part of the remuneration granted to employees by the employer to provide for personal travel expenses incurred during the year. Apart from the employee, it covers travelling expenses of spouse, children as well as dependent parents and siblings. Further, the exemption is restricted to two children born on or after October 1, 1998. There is no restriction on the number of children born before this date.
Leave Travel Allowance (LTA) is the part of the remuneration granted to employees by the employer to provide for personal travel expenses incurred during the year. Apart from the employee, it covers travelling expenses of spouse, children as well as dependent parents and siblings. Further, the exemption is restricted to two children born on or after October 1, 1998. There is no restriction on the number of children born before this date.
How does LTA save on tax outgo?
Under section 10 (5) of the Income-Tax Act, if an employee who is in receipt of LTA undertakes a journey within the country, s/he can claim the value of the allowance exempt from income tax. For the purpose, the individual should have been on leave for the period during which the journey was undertaken.
Can you claim it every year?
No. The exemption can be claimed only twice in a block of four calendar years. The current block has started from January 1, 2010, and will last until December 31, 2013. The previous one ended on December 31, 2009. If you do not avail of the concession in any particular block or undertake just one journey, you become entitled to carry forward one journey to the next block. However, this has to be utilised in the first year of the new block. For instance, if you availed of the concession just once instead of twice between January 1, 2006 and December 31, 2009, then you are allowed to carry forward the unused one into the subsequent block (2010-2013), provided you undertake the journey in 2010 itself. A point to be noted here is that even if you don't avail of the concession at all during a particular block, you can carry forward only one entitlement to the next block.
Can the entire amount be claimed as an exemption?
The exemption will depend on certain criteria specified. Firstly, it is the lower of the actual expenses incurred and the allowance granted by your employer. Let's assume your LTA is Rs 10,000, but you end up spending Rs 15,000 on travelling. In such a case, the exemption will be allowed to the extent of Rs 10,000. Conversely, if your LTA stands at Rs 15,000 and your actual expenses amount to Rs 10,000, you will still be entitled to a deduction of only Rs 10,000.
Other parameters that decide the extent of exemption?
If you have opted to fly to the destination, an amount not exceeding the economy class airfare of the national carrier by the shortest route to that city would be admissible as deduction. In case you are travelling by road or rail, the cost of first class air-conditioned ticket to the destination by the shortest route would constitute the benchmark. Besides, if your travel plan entails visiting multiple places during the trip, the destination farthest from your place of residence would be taken into account for determining the exemption amount.
What if the travel bills are not submitted before the deadline?
If you fail to submit your travel bills pertaining to LTA claim with your employer within the time prescribed, your employer would consider the amount of LTA paid as taxable and deduct income tax at the rate applicable to you. However, you can claim LTA exemption at the time of filing your income tax return.
If you fail to submit your travel bills pertaining to LTA claim with your employer within the time prescribed, your employer would consider the amount of LTA paid as taxable and deduct income tax at the rate applicable to you. However, you can claim LTA exemption at the time of filing your income tax return.
