Income Tax Exemptions

The Income-Tax Department allows you to claim exemption from tax on leave travel allowance only twice in a block of four calendar years.

With the year end approaching, are you planning a vacation to use up the Leave Travel Allowance (LTA) your office offers? Good idea! But while you’re planning and packing for that holiday, spare a thought for what LTA means for your taxes. With that in mind, here are three aspects about LTA that you should keep note of.

Exemptions

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.

These blocks are also 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.

But what if you have travelled 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.

Sounds a bit confusing? Don’t worry. All what these rules imply is that your office may be paying you an amount as LTA every year. Nevertheless, if you have already claimed exemption on LTA twice in that particular block, this portion of your income will be taxable in the remaining two years of the block.

Thinking of restricting vacationing to every other year to fit the exemption rule? Well, when both you and your spouse are working, you can work around this rule a bit. You both cannot claim exemption for the same journey. So you can vacation every year and claim exemption for two different journeys each.

Claims

The second aspect relates to what you can claim. Under LTA, you are eligible to claim only the expenses incurred on travel per se. Expenses incurred on stay, food, sightseeing, and so on are not included. The travel must also be within the country.

You can claim travel expenses for yourself and eligible members of your family. These eligible members include spouse, children (not more than two, if they are born after 1998) and dependent parents, brothers and sisters.

The third aspect relates to the amount you receive. Strictly speaking, 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.