FAQs On LTA: How Your Holiday Can Help You Save Tax

 

A common query on our readers’ minds’ around holiday season is about Leave Travel Allowance.

 

After all, it has probably been a busy work year, so taking a break and going on holiday is an excellent idea. An added benefit is that taking a little holiday helps you to save tax – through your Leave Travel Allowance.

 

Here are some things to keep in mind:

 

1. What is Leave Travel Allowance?
   
   Leave Travel Allowance, aka LTA, is simply the cost of travel granted to you, as an employee, to travel anywhere within the country, when you take leave from work. Basically, based on some simple conditions, you can take a holiday within India (spend on air fare, rail etc) and reduce only the actual to and fro travel expense (not the boarding / lodging / other expense) from your taxable income, upto certain limits.



 
2. On what basis can I claim LTA?
   
   There are 2 simple conditions:
   1. If you have taken leave from your company, and
   2. You have travelled, then you can claim Leave Travel Allowance for the travel undertaken by you.
   
   
   You can either travel with or without your “family”, where “family” includes your spouse, up to 2 children, parents, brothers and sisters.
   
   If you travel with your family, and you are the one paying for travel, then you can claim LTA on the travel, as long as your family members are mainly or entirely financially dependent on you.
   
   If you travel without your family, you can claim LTA only for yourself.



 
3. What are LTA blocks? What is the current LTA block? How many times can I claim LTA in one block?
   
   An LTA block is a period of 4 years within which you can claim 2 LTA journeys.
   LTA years are calendar years, not financial. Hence the current LTA block is from Jan 1st 2010 to Dec 31st 2013. You can claim your LTA on 2 occasions within these 4 years.
   
   This is not related in any way to when you started your employment with your current company. It depends only on the block of 4 years, set by the Government of India.
   
   Also note, if you and your spouse are both working, then both of you can claim LTA 2 times each, i.e. a total of 4 times, in a block of 4 years. Of course, this is on expense actually incurred by you, so if you pay for the holiday travel expense, you should claim the LTA.
   
   Also note, you can only claim LTA once in a particular calendar year. So if you travel twice in 1 year, you can claim one journey’s travel expenses, and ask your spouse to fund and claim the other journey’s travel expenses.



 
4. What if I didn’t claim LTA in my last block? Can I claim additional LTA in the current block?
   
   Yes. If you don’t claim LTA on one or both journeys in a particular block, then you can carry forward one (only one) journey to the first year of the next block. For this block, the first year is already finished, since we are in 2011 now, but if you don’t claim one or both of your allowed LTA journeys in the current block, you can carry a single journey forward into 2014 (i.e. Jan 1st 2014 to Dec 31st 2014).



 
5. What are the LTA conditions?
   
   There are a few key conditions to keep in mind:
    
   1. Firstly, leave “travel” allowance refers only to the actual cost of to and fro travel, and does not include stay, food, entertainment, or other expenses
   2. Your “family” refers to spouse, up to 2 children, parents, brothers and sisters who are mainly or entirely financially dependent on you. It is not available for more than 2 children born after October 1, 1998. ‘Child’ includes a step-child or adopted child as well.
   3. The conditions/ limitations for the exemption are as follows:
       

      Particulars of journey	Amount exempted under LTA
      Where the journey is performed by air.	Economy class airfare of the national carrier by the shortest route to the place of destination or amount actually spent, whichever is less.
      Where the places of origin of journey and destination are connected by rail and journey is performed by any mode of transport other than air.	Air-conditioned first class rail fare by the shortest route to the place of destination or amount actually spent, whichever is less.
      Where the place of origin of journey and destination (or part thereof) are not connected by rail, and
      Where a recognized public transport exists	First class or deluxe class fare by the shortest route or the amount spent, whichever is less.
      Where no recognized public transport system exists	Air-conditioned first class rail fare by the shortest route (as if the journey is performed by rail) or the amount actually spent, whichever is less.

   
    
6. How do I actually claim my LTA?
   
   If you have travelled, you will have records of your travel. Actual tickets are not technically required, however many companies do still ask for proof of travel i.e. ticket copies. You will have to fill a small form which takes the details of your journey, place of travel, dates, fares of the journey, and submit your travel proof.
   
   You can submit a copy of your proof of travel to your company, which has either been giving you an LTA component in your salary monthly, hence you have already received the amount, or else if it is not already a salary component, then the company will give you a reimbursement of the amount.
   Remember to keep a copy for your own records as well – as the onus of providing proof of travel is now on you, the employee, and no longer on your employer.
   
   For the amount actually spent by you, and reimbursed to you by your company, you do not pay any tax. If you have LTA as a salary component and you do not utilize it, it is part of your taxable salary and you pay tax on it.



 
7. What happens if my travel is over 2 calendar years, example if I travel to my destination in December 2010 and back from my destination in January 2011?
   
   When travelling, you have to keep one thing in mind – your current block.
   If your travel (December 2010 to January 2011) is within a specified block of 4 years, which it is in the current block’s case, then you have nothing to be concerned about. Go ahead and claim your LTA.
   
   So now you know the facts and details about what is LTA, how it will save you tax and how to claim it. So go ahead - work hard, holiday well, and remember to save tax!
   
   If you need help in Tax planning other aspects of your financial life, please do Contact Us –we would be happy to help you with a Comprehensive Financial Plan that will sort out your financial life completely – giving you absolute peace of mind!

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Comments
kiran.s.patil@tatatechnologies.com Feb 29, 2012 Dear sir, please let me know on thing regarding LTA. I am getting LTA 24,000/- Per annum. Block of 4 years menas jan 2010 to dec 2013 now 2012 is going on. but i had not claim LTA amount in last 2 years ( in 2010 & 2011) i.e. 48,000/-. so can I claim this amount in 2012. or only once in year i can claim LTA in other word i want to ask. In 4 years my LTA amount goes up to (24000x4year=96,000/- ) means 96000 i can claim at 2 times in 4 years. thanks kiran patil, pune, M-9922929396
kkennedy@windhammountain.com Oct 16, 2013 Thank you so much for another useful input. I sent the list to my parents, who are coming over here help me taking care the coming baby. This will help them so muck to catch up with the baby items in the modern days.Keep writing!

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