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Leave Travel Allowance is an allowance that is usually paid as part of Salary (Annual CTC to be specific) by employers to their employees. The original idea behind the LTA component was to help the employee meet his travel expenses. However, of late it has become yet another component of the CTC and no one cares much about it except how much is paid out as LTA every year by the employer.
LTA is usually decided for a year and then paid out on a monthly basis. For ex: If your LTA is Rs.24,000 every year, you will get Rs.2,000 every month as LTA.
First and the most important is the tax exemption angle. If you have been thinking that the amount you get as LTA is tax-free all the time, you are not correct. The Income-Tax department allows you to claim exemption from tax on this amount only twice in a block of four calendar years.
Exemption is given on the actual expenses incurred. An example will better help you understand how it works:
Say Mr. Raju gets Rs.24,000 per annum as LTA.
Case 1:Actual expenses incurred on travelling Rs. 20000. In this case, Raju will have to pay tax on Rs.4,000.
Case 2: Actual expenses incurred on travelling Rs.30,000. In this case Raju need not to pat tax on LTA amount of Rs.24,000.
Case 3: Actual expenses incurred Rs.0 i.e. Raju did not travelled. In this case whole LTA amount of Rs.24,000 is taxable.
These blocks are notified by the department. For example, 2012 falls in the 2010-2013 block. This implies that in these four years, you can claim the exemption for the LTA amount only twice.
One block consists of four calendar years. Don’t confuse yourself with calendar year & assessment year. Calendar year stars from 1st January & ends with 31st March, whereas Assessment year starts with 1st April & ends with 31st March.
|Previous Block||2006 – 2009|
|Current Block||2010 – 2013|
|Next Block||2014 – 2017|
Current block 2010-13 ends on 31st December 2013
But what if you have traveled only once in the 2010-2013 block?
In such a case, you can carry forward the travel to the first year (2014) of the next block (2014-2017). In addition to this, you will be eligible to travel two more times in the next block.
Restriction on children
The exemption will not be available to more than 2 surviving children of an individual born after 1-10-1998. This restriction shall not apply in respect of children born before 1-10-1998 and also in case of multiple births after one child. It may be noted that section 2 (15B) of the Act defines a child as includes a step child and an adopted child of the individual.
Mode of Travelling
Income Tax exemption on Leave Travel Allowance (LTA) is allowed with reference to mode of Journey as mentioned below:
- Journey by Air: Maximum Economy fair of the National carrier by shortest route to the place of destination.
- Journey by Rail: Maximum First Class A.C. rail fare by shortest route to the place of destination.
- Journey by recognised public transport :Where a recognised public transport is available, maximum 1st Class or deluxe class fair by shortest route to the place of destination where there is the absence of connectivity by rail
- Journey by any other mode: An amount equal to first class rail fare by shortest route to the place of destination, in absence of public transport system as if journey had been performed by rail way.
Proof of Journey
You are required to submit the proof of travel and make a claim in your office. You will get exemption (if you have not yet exhausted the allowed two times) only for the amount you are eligible for or the amount actually spent on travelling, whichever is lower.
However, some employers may not ask for proof. Employers may disburse the LTA amount after taking a declaration that you have spent this money received from the company for the said purpose of travel.
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