This perk is another avenue to save tax
Leave travel assistance (LTA) is generally paid as a part of the employees' remuneration. With proper tax planning, an employee can save some tax through this mode. The LTA amount is received from the employer towards a journey within India. LTA is eligible for deduction under the Income Tax Act subject to specific conditions. Under Section 10 of the Income Tax Act, any travel concession or assistance is exempt provided it is received by an individual to proceed on leave to travel to any place in India with his/her family.
The exemption is available for two journeys in a block of four calendar years since 1986. Where such travel concession or assistance is not availed of by the individual during any such block of four calendar years, it may be carried forward. Such travel concession or assistance is eligible for exemption if availed of during the year immediately following the four year block.
In order to claim exemption, the employee must produce original proofs for expenses, i.e., tickets, bills, etc. The tax benefit is for actual fare only. Amount spent on hotel, food, etc. is not allowed. 'Family' means the spouse and children of the individual, and parents, brothers and sisters who are dependent on the individual. The amount exempt will not exceed the expenses actually incurred for the travel. The exemption is available for a maximum of two children of an individual. The journey should be in India only. The exemption is available for the farthest place by shortest route when a circular journey is undertaken.
In case the journey is by air, an amount not exceeding the economy fare of the national carrier by the shortest route to the place of destination is taken. In case the place of origin of journey and destination are connected by rail, and the journey is by any other mode of transport other than by air, an amount not exceeding the air conditioned first class rail fare by the shortest route to the place of destination is taken.
In case, the place of origin of journey and destination are not connected by rail, the amount eligible for exemption will be:
• Where a recognised public transport system exists, an amount not exceeding 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, an amount equivalent to the air conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail
According to the Income Tax Act, the value of any travel concession or assistance received by him will also be exempt if it is received from the former employer for the employee and family, for proceeding to any place in India after retirement from service or after the termination of his service.
