Everything you need to know about LTA
Leave travel allowance is a common tax exemption provided by most employers. However, many are still unclear about how to claim it. Spend five minutes to clear all your doubts.
Companies usually include leave travel allowance in your salary structure, so that you can claim an exemption on holidays you take with your family. The Income Tax Act has, however, made claiming this exemption very complicated. Ultimately, very few people end up using it as a tax-saving advantage. If you want to give it a shot yourself, though, here’s a well-rounded explanation of LTA.
Who can be included in the LTA?
To claim LTA, you must travel alone or with your family. The term family includes your spouse, parents, siblings and children. Other relatives cannot be included in your claim. Exemption is allowed for at most two children if they were born after October 1, 1998. However, if they were born before that, you can claim for any number of children you may have. No age limit has been set down for children and they can be adults as well. If your family travels without you, it’s not advisable to claim LTA as the law specifies that you should be travelling as well.
What does LTA cover?
Only the cost of travel is covered by your LTA. You may travel by air, road or rail. For air travel, you can claim the economy class fare of a national carrier via the shortest route possible. Rail travel exemption includes air conditioned first class tickets. For road transport, travelling first class deluxe with a recognized public carrier is allowed. For LTA to be valid, you need to travel the shortest route possible to your destination. In case of multiple destinations, the city farthest from your home town is considered for calculating your claim. You should keep your travel proof in the form of bus, air and rail tickets handy as they will be needed by your employer.
Only domestic trips are covered under LTA. Any international trips that you make will not be considered for an exemption. In some organizations, a leave fare concession is provided for foreign trips as well. But this concession will be taxable.
You cannot claim exemption on leave fare which is not included in your claim limit. Similarly, if your tickets cost less than your concession, you will receive an exemption for your tickets only. For example, if your exemption is Rs20,000 and your tickets cost Rs25,000, your tax exemption will be limited to Rs20,000. Based on the same exemption of Rs20,000, if you spend only Rs15,000, you will get an exemption only on Rs15,000.
When can you claim LTA?
LTA can be claimed for two journeys every block. Blocks are determined by the government and are usually every four years. For example the current block is 2010 to 2013 and the next one is from 2014 to 2017. In case you have claimed only one LTA in the current block or none at all, you can carry forward them to the next block.
How to make a claim?
A written declaration of your travel details and amount spent should be submitted to your employer. A Supreme Court ruling says that this declaration is enough and you don’t need to produce any bills. However, you should keep them safe as employers can ask for proof.
Are both spouses eligible for LTA?
If your spouse also has LTA in their salary structure, you both can claim it individually as well. Two LTAs cannot be claimed for the same journey.
What if you don’t travel?
If you do not travel, you can still get the LTA amount as per your salary. But this amount will be taxable depending on which tax bracket you fall in.