All about LTA

LTA (Leave Traveling Allowance / Leave Traveling Assistance) given by your employer as part of your salary for your travel expenses while you are on leave. You will anyway receive this money from your employer but you need to pay tax if you have not really traveled unless you claim LTA tax exemption benefit.

This exemption comes under the provisions of Section 10(5) of the IT Act according to which in the case of an individual, the value of any travel concession or assistance received by him will be exempt if it is received - from his employer, for himself and his family - in connection with his proceeding on leave to any place in India.

Important point to note here :

•     You have to
• be on leave in the period for which your claiming the LTA.
• (or) travel after your retirement
• (or) travel after after termination of your service.
• This exemption covers only your travel expenses --- Hotel, food, sight-seeing, local conveyance etc are not included.
• You can not claim TAXI/AUTO expenses to the airport or station if you are traveling by air/train/bus.
• If you rent a car / anything for your sigh seeing, the expenses would not be exempted.
• If you are going through any travel dealer on some kind of package, you need to take receipt from them to show the actual travel expenses. In general these packages include hotel stay and other sight seeing charges, but the exemption would not apply for all those.
• LTA covers travel expenses for your family members also if they are traveling along with you. Please remember the condition that you have accompany them.
• For the purposes of this clause, ‘family’ means the spouse and children of the individual, and parents and siblings wholly or mainly dependent on the individual.
• According to sub-rule(4) of rule 2B exemption on travel concession will not be admissible to more than two surviving children of an individual born after 1-10-1998. This restriction will not however apply in respect of children born before 1-10-1998, and also in cases where an individual, after getting one child, begets multiple (twins/triplets/quadruples, etc) on the second occasion. In recooking this limit of two children, children born out of multiple birth after the first child will be treated as "one child" only.
• It applies for step children also Section 2(15B).
• The maximum exemption you can claim is the maximum of your actual expenditure incurred for journeys performed and the actual LTA amount received from your employer.
• The exemption can be availed only in respect of two journeys performed in a block of four calendar years. Present four year block is 2006 - 2009 (i.e., 1-1-2006 to 31-12-2009). Coming four year blocks will be 2010-2013, 2014-2017 etc.
• In four years, you can claim for tax exempt only for tow years.
• You can not take exemption for two journeys in a calendar year.
• Please remember that, here year is a calendar year (Jan-Dec) , different from usual Apr-Mar financial year.
• If you have not availed travel concession or assistance during any of the specified four-year block periods on on both occasions, or in one of the two permitted occasions (i.e, you have either taken exemption once or none), then the exemption can be claimed 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.
• So, if you have not taken the benefit this exemption in four years , dont worry !! you can take one extra exemption in the following four years.
• For example: you have taken just one/none exemption/s in 2006-2009. Then you can one exemption from 2006-2009 to 2010-2013. Rule is that: you have use this exemption in 2010. Suppose you have taken exemption in 2010, 2011 in the period 2010-2013, which means you have effectively taken only one exemption in 2010-2013. So, you avail one more exemption in 2014 and it continues.
• Mode of transport :
• For journeys performed by Air only air economy fare of national carrier (Indian Airlines or Air India) by the shortest route to the place of destination can be exempted. IT tax rule says this applies to only national carriers but experts say that it applies to even Deccan or any other private carriers also.
• For journeys 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, not more than the air-conditioned first class rail fare by the shortest route to the place of destination can be exempted.
• For journeys where place of origin of journey and destination or part thereof are not connected by rail, (i) Where a recognized public transport system exists, not more than the first class or deluxe class fare on such transport by the shortest route to the place of destination. (ii) Where no recognized public transport system exists, not more than 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.
• You can travel by taxi, but the maximum amount can not be more than the specified amount in the above three rules. You need to claim the car/taxi travel expenses while filing your returns if your employers does not accept this.
• Shortest path : The exemption is available for the farthest place by the shortest route while going on vacation/coming back from vacation. This particularly applies when a circular journey is made.
• Simple Algorithm -- for circular journeys. If you leave from A and then visit B, then C, D, E, F, .. and come back to A.
• To journey : Take one city at a time, if the distance you have traveled to reach the city is shortest then you can avail the LTA benefit for the journey to that city, otherwise your benefit stops at the previous city and your "To journey" also stops. Here, suppose you reach B by shortest distance then you can claim the benefit for A->B. Now, if you come to C after B, and if there is any other route to reach C directly (not via B) then you can not claim benefit for your B-->C journey. Now the journey after this ( C-->D-->E-->F--> G-->A) is your return journey.
• Return Journey : Now, take one city at a time from the city where your return journey starts (here C). If your are returning to A from that city on a shortest route then you stand to take benefit for the whole journey starting from that city. Coming to our example, if C-->D-->E-->F--> G-->A and D-->E-->F--> G-->A are not the shortest routes from C and D respectively then your C-->D can not be claimed. Now if E-->F--> G-->A is the shortest route then you can claim E-->F--> G-->A.
• I hope, I have not confused you. If you have any specific questions just drop a comment.
• If you traveled any time between Apr 2007 -- March 2008, then you have to claim the LTA benefit in that assessment year itself i.e. 2007-2008. And this holds for any other year.
• It does not cover international travel. Travel must be within India.
• In order to claim the exemption, the assessee must produce original proofs for expenses i.e. the tickets or bills. For air travel, you employer might ask you to submit the boarding pass as proof that you have really traveled. This is actually not required : if you have ticket that mentions that you have actually BOARDED the flight, that should be enough. You can always tackle this while submitting returns if your employer doesn't agree. E-tickets for air travel are acceptable.
• You can not carry the LTA amount from one year to another. There is a confusion about this. If you think , you can then consult your tax expert, at least IT website doesn't seem to mention anything in this regard.

Claim LTA this year (2007 - 2008)

As you know tax rates coming down from next financial year and if you want to save more money using the LTA benefit then travel in 2007-2008 and get the most benefit. If you salary is in the range of 2.5 - 5 L then you have to pay 30% tax on this income, where as this percentage will come down next year. So, if you avail of the LTA tax benefit this year, then the you dont need to pay that 30% tax and you save more compared to claiming next year where you get 10% - 20% tax benefit. If your taxable income is more than 5L then dont worry, It doesn't matter.

Ahmed

PS: If you still have any doubts just drop in a comment mentioning your e-mail id.