Lta exemption
This query is : Resolved
11 March 2014
Dear sir
Please explain how to get the LTA Exemption.
Please explain how to get the LTA Exemption.
11 March 2014
is the most common element of compensation adopted by employers to remunerate employees due to the tax benefits attached to it. An LTA is the remuneration paid by an employer for Employee’s travel in the country, when he is on leave with the family or alone. LTA amount is tax free. Section 10(5) of the Income-Tax Act, 1961, read with Rule 2B, provides for the exemption and outlines the conditions subject to which LTA is exempt. Through this write-up, I want to shed light on the taxability and some other interesting relevant aspects which you as a salaried employee must keep in mind.
Exemption of Fare Only - LTA exemption can be claimed where the employer provides LTA to employee for leave to any place in India taken by the employee and their family. Such exemption is limited to the extent of actual travel costs incurred by the employee. The total cost of the holidays is not covered, only the travelling cost is covered.
Travel within India only allowed- Travel has to be undertaken within India and overseas destinations are not covered for exemption.
Exemption on Actual Travel Expense - For example, where an employer provides LTA of Rs 25,000, but an employee spends only Rs 20,000 on the travel cost, then the exemption is limited to only Rs. 20,000. Travel cost means the cost of travel and does not include any other expenses such as food, hotel stay etc.
Meaning of Family for LTA :- The meaning of ‘family’ for the purposes of exemption includes spouse and children and parents, brothers and sisters who are wholly or mainly dependent on you. An individual would not be able to claim the exemption in relation to his parents, brother or sisters unless they are wholly or mainly dependent on the individual.
Restriction on Number of Child for Claiming LTA :- Further, exemption is not available for more than two children of an individual born after October 01, 1998. This restriction does not apply in respect of children born before this date, and also in cases where an individual, after having one child, begets multiple children (twins or triplets or quadruplets, etc.) on the second occasion. The term “Child” includes a step-child and an adopted child of the individual.
also The tax rules provide for an exemption only in respect of two journeys performed in a block of four calendar years. The current block runs from 2010-2013. If an individual does not use their exemption during any block on any one or on both occasions, their exemption can be carried over to the next block and used in the calendar year immediately following that block.
In such cases, the journey performed to claim such exemption will not be counted for the purposes of regulating future exemptions allowable for the succeeding block. For example, Mr. X joins an organisation on April 1, 2008 and is entitled to a LTA of Rs 30,000 per annum (financial year 2008-09).
X undertook a journey in December 2008 and used his exemption. However, for his LTA entitlement for 2009-10, he did not undertake a journey during the calendar year 2009.
He can undertake the journey in 2010 to claim the exemption in relation to the LTA. He would also be able to use the LTA benefit for two other journeys which he can undertake in the current block 2010-13 in relation to his LTA entitlement for future years.
Exemption of Fare Only - LTA exemption can be claimed where the employer provides LTA to employee for leave to any place in India taken by the employee and their family. Such exemption is limited to the extent of actual travel costs incurred by the employee. The total cost of the holidays is not covered, only the travelling cost is covered.
Travel within India only allowed- Travel has to be undertaken within India and overseas destinations are not covered for exemption.
Exemption on Actual Travel Expense - For example, where an employer provides LTA of Rs 25,000, but an employee spends only Rs 20,000 on the travel cost, then the exemption is limited to only Rs. 20,000. Travel cost means the cost of travel and does not include any other expenses such as food, hotel stay etc.
Meaning of Family for LTA :- The meaning of ‘family’ for the purposes of exemption includes spouse and children and parents, brothers and sisters who are wholly or mainly dependent on you. An individual would not be able to claim the exemption in relation to his parents, brother or sisters unless they are wholly or mainly dependent on the individual.
Restriction on Number of Child for Claiming LTA :- Further, exemption is not available for more than two children of an individual born after October 01, 1998. This restriction does not apply in respect of children born before this date, and also in cases where an individual, after having one child, begets multiple children (twins or triplets or quadruplets, etc.) on the second occasion. The term “Child” includes a step-child and an adopted child of the individual.
also The tax rules provide for an exemption only in respect of two journeys performed in a block of four calendar years. The current block runs from 2010-2013. If an individual does not use their exemption during any block on any one or on both occasions, their exemption can be carried over to the next block and used in the calendar year immediately following that block.
In such cases, the journey performed to claim such exemption will not be counted for the purposes of regulating future exemptions allowable for the succeeding block. For example, Mr. X joins an organisation on April 1, 2008 and is entitled to a LTA of Rs 30,000 per annum (financial year 2008-09).
X undertook a journey in December 2008 and used his exemption. However, for his LTA entitlement for 2009-10, he did not undertake a journey during the calendar year 2009.
He can undertake the journey in 2010 to claim the exemption in relation to the LTA. He would also be able to use the LTA benefit for two other journeys which he can undertake in the current block 2010-13 in relation to his LTA entitlement for future years.
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11 March 2014
Amount Exempted
Journey performed by Air - Economy Air fair of National carrier by the shortest route or the amount spent which ever is less will be exempt
Journey performed by Rail – A.C. first class rail fare by shortest route.or amount spent which ever is less will be exempt.
Place of origin and destination place of journey connected by rail but journey performed by other mode of transport - A.C. first class rail fare by shortest route or amount spent which ever is less.
Place of origin & destination not connected by rail(partly/fully) but connected by other recognised Public transport system - First class or deluxe class fare by shortest route or amount spent which ever is less.
Place of origin& destination not connected by rail(partly/fully) and not connected by other recognised Public transport system also – AC first class rail fare by shortest route (as the journey had been performed by rail) or the amount actually spent ,which ever is less.
Journey performed by Air - Economy Air fair of National carrier by the shortest route or the amount spent which ever is less will be exempt
Journey performed by Rail – A.C. first class rail fare by shortest route.or amount spent which ever is less will be exempt.
Place of origin and destination place of journey connected by rail but journey performed by other mode of transport - A.C. first class rail fare by shortest route or amount spent which ever is less.
Place of origin & destination not connected by rail(partly/fully) but connected by other recognised Public transport system - First class or deluxe class fare by shortest route or amount spent which ever is less.
Place of origin& destination not connected by rail(partly/fully) and not connected by other recognised Public transport system also – AC first class rail fare by shortest route (as the journey had been performed by rail) or the amount actually spent ,which ever is less.
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11 March 2014
Here are few of the FAQ's on LTA that may help you
1. On what basis can I claim LTA?
If you fulfill two criteria, you can do so:
i. You should have taken leave from your company
ii. You should actually travel
You can either travel alone or with your family. However, if your family travels without you, no LTA can be claimed.
2. How often can I claim LTA?
i. Twice in a block of four calendar years.
ii. LTA is not related to when you started your employment as the government has fixed blocks of years for the purpose of claim.
iii. These blocks are not financial years (April 1 to March 31); they are calendar years (January 1 to December 31).
iv. The current block is 2010-13, that is, between January 2010 and December 2013.
v. During this time period, a person is entitled to two LTA claims.
vi. A person can get an income tax exemption for two journeys in a block of four calendar years. But he can make a trip only once in year.
3. What if I fail to avail of it?
In case you fail to do so, there is a carry over option.
Let's say that in the block of four years, you never did claim any LTA.
You can do so in the first year of the next block of four years.
4. What is the proof of travel to avail of LTA?
According to rule 2B, you can produce an air, rail or any public transport ticket.
You can even submit the bills issued by the car rental company if you rent a vehicle.
However, the travel is applicable anywhere in India [ Images ] and not abroad. So an international air ticket will not hold.
5. Is LTA taxed?
You can receive LTA as either reimbursement or allowance.
Reimbursement
In case of LTA as reimbursement, it is not taxable.
Let's say your company offers an LTA of Rs 50,000. For proof of travel, you produce an air ticket of Rs 10,000.
In such a case, you can claim only Rs 10,000 as LTA and it will be exempt from tax.
Allowance
If you do not submit any proof of travel, you will get your LTA but will have to pay tax on it.
If you produce proof of travel, it will not be taxable to the extent your proof of travel is covered.
Let's say you are entitled to Rs 50,000 as LTA as part of your salary. Since you produced proof of travel as Rs 10,000, you will not be taxed on this amount. However you will be taxed on the net Rs 40,000 as per your income tax slab rate.
LTA is not a fringe benefit as the latter are benefits that are usually enjoyed collectively by the employees and cannot be attributed to individual employees.
6. Can both spouses claim LTA?
If both spouses are getting the LTA benefit in their places of work, they can both claim exemption on LTA from their employers and the benefit for four journeys in one block.
They do not have to take the precaution of not travelling twice during the same year.
Moreover, they can take the same family members or different ones as long as they stick to the definition of the members for this purpose.
Family includes spouse, children as well as dependent parents, brothers and sisters. In respect of children born on or after October 1, 1998, the exemption will be restricted only to two surviving children unless the birth after one child has resulted in multiple births (twins or triplets).
7. If I and my wife travel this year, can we both claim LTA simultaneously?
No. You cannot claim LTA twice for the same journey. If both of you take a holiday together and you claim LTA, she cannot.
8. If I am entitled to a particular amount as LTA, but my expenses are higher, can I claim more?
Say in the year 2005-06, you receive on Rs 8,000 as LTA, but spend Rs 50,000 on travel. You can claim exemption only to the tune of Rs 8,000.
1. On what basis can I claim LTA?
If you fulfill two criteria, you can do so:
i. You should have taken leave from your company
ii. You should actually travel
You can either travel alone or with your family. However, if your family travels without you, no LTA can be claimed.
2. How often can I claim LTA?
i. Twice in a block of four calendar years.
ii. LTA is not related to when you started your employment as the government has fixed blocks of years for the purpose of claim.
iii. These blocks are not financial years (April 1 to March 31); they are calendar years (January 1 to December 31).
iv. The current block is 2010-13, that is, between January 2010 and December 2013.
v. During this time period, a person is entitled to two LTA claims.
vi. A person can get an income tax exemption for two journeys in a block of four calendar years. But he can make a trip only once in year.
3. What if I fail to avail of it?
In case you fail to do so, there is a carry over option.
Let's say that in the block of four years, you never did claim any LTA.
You can do so in the first year of the next block of four years.
4. What is the proof of travel to avail of LTA?
According to rule 2B, you can produce an air, rail or any public transport ticket.
You can even submit the bills issued by the car rental company if you rent a vehicle.
However, the travel is applicable anywhere in India [ Images ] and not abroad. So an international air ticket will not hold.
5. Is LTA taxed?
You can receive LTA as either reimbursement or allowance.
Reimbursement
In case of LTA as reimbursement, it is not taxable.
Let's say your company offers an LTA of Rs 50,000. For proof of travel, you produce an air ticket of Rs 10,000.
In such a case, you can claim only Rs 10,000 as LTA and it will be exempt from tax.
Allowance
If you do not submit any proof of travel, you will get your LTA but will have to pay tax on it.
If you produce proof of travel, it will not be taxable to the extent your proof of travel is covered.
Let's say you are entitled to Rs 50,000 as LTA as part of your salary. Since you produced proof of travel as Rs 10,000, you will not be taxed on this amount. However you will be taxed on the net Rs 40,000 as per your income tax slab rate.
LTA is not a fringe benefit as the latter are benefits that are usually enjoyed collectively by the employees and cannot be attributed to individual employees.
6. Can both spouses claim LTA?
If both spouses are getting the LTA benefit in their places of work, they can both claim exemption on LTA from their employers and the benefit for four journeys in one block.
They do not have to take the precaution of not travelling twice during the same year.
Moreover, they can take the same family members or different ones as long as they stick to the definition of the members for this purpose.
Family includes spouse, children as well as dependent parents, brothers and sisters. In respect of children born on or after October 1, 1998, the exemption will be restricted only to two surviving children unless the birth after one child has resulted in multiple births (twins or triplets).
7. If I and my wife travel this year, can we both claim LTA simultaneously?
No. You cannot claim LTA twice for the same journey. If both of you take a holiday together and you claim LTA, she cannot.
8. If I am entitled to a particular amount as LTA, but my expenses are higher, can I claim more?
Say in the year 2005-06, you receive on Rs 8,000 as LTA, but spend Rs 50,000 on travel. You can claim exemption only to the tune of Rs 8,000.
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