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All you need to know about LTA
Want to go on vacation at your employer's expense? Well, you are entitled to it.
Leave Travel Allowance is actually a rather simple tax-saving benefit that covers your holiday expenses.
Here, we give you a low-down on LTA.
Only the travel costs, not the eating and partying or hotel bills.
So, whether you fly, hop on to a train or take public transport, you can show the ticket and claim your LTA.
What if you want to travel by a car? If a car is owned by a central government organisation like ITDC, the state government or the local body, LTA is permitted.
If you could not get public transport and resorted to private transport, try and get a bill. If the bill is not accepted by your employer, you can always file an income tax return, claim an exemption and get a refund.
How often can you claim it?
Twice in a block of four calendar years.
In case you were unaware, LTA is not related to when you started your employment. The government fixes blocks of years.
These blocks are not financial years (April 1 to March 31); they are calendar years (January 1 to December 31).
The current block is 2006-09: January 2006 to December 2009.
The earlier one was from 2002-05: January 2002 to December 2005.
During this time period, a person is entitled to two LTA claims.
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.
No time for a holiday?
Then you can carry it forward.
One LTA can be brought forward and claimed in the first year of next block.
Let's say you do not take your LTA in 2002-05. Or that you use only one LTA. This means you will be able to take the pending LTA in 2006. This means that, in the 2006-09 block, you will be totally entitled to the three journeys.
And if you switch jobs? You can get the LTA not only from present organisation but also from the former employer, if the concession is lying unutilised.
Let's say that, in the 2002-05 block, you claimed LTA in 2003. In 2004 you switched jobs. You can still claim your second journey with your new employer. Of course, your new employer will ask to look at your earlier tax returns to see whether it has been claimed or not.
Your family. This term is quite wide; it includes yourself, parents, siblings dependent on you, spouse and children.
For children born after October 1, 1998, the exemption is restricted to only two surviving children (unless, of course, one birth has resulted in multiple children like twins and triplets).
Well, what if your spouse is also employed? It does not matter, your spouse too is covered.
What if you don't take it?
If LTA is not utilised, it gets added to the entire salary. And then you are taxed on it.
Let's say you and spouse are both employed and both have LTA as part of the salary package. Your LTA is Rs 20,000 and hers is Rs 20,000 too.
Both of you and your child go for a holiday. The tickets for the three of you amount to Rs 15,000. You supply the tickets to your office and this amount will be eligible for a tax deduction, the balance Rs 5,000 will be taxed. You can claim exemption only to the tune of your expenditure.
Now, if you claim this, your wife will not be able to claim this same holiday from her employer. Her Rs 20,000 will be taxed. Unless another holiday is made and she claims it.
Or, let's say that you spend Rs 30,000 on tickets but your LTA is just Rs 20,000. You can claim up to Rs 20,000 and tell your wife to claim her ticket from her employer.
So go and catch that plane or hop onto a train. Not only is a holiday good for health but can also be a tax haven.
i. You can get LTA only if you have applied for leave from your company and have actually travelled.
ii. If your family travels without you, no LTA can be claimed. You have to make the trip, either by yourself. If claiming for family, you should travel with them.
iii. You will need to keep your air, rail or public transport ticket. Or, if you rented a car, give the bill issued by the car rental company.
iv. International travel is not valid. It must be within the country.
v. Though you can claim two journeys in a block of four years, you can claim the LTA benefit just once in a year. You cannot claim both the journeys in one year. So, if you make two trips in a year, you lose one. A way out is to claim one and make your spouse claim the other.
Meenakshi Subramaniam is a former IRS officer residing in Kolkata.
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