How is my LTA Taxed?

Leave Travel Assistance (LTA) has got a tax treatment which is quite different from all the other type of allowances and perquisites that you get. And that’s the primary reason it is the one that gets people confused more often than not.
The following points need to be kept in mind while taking the LTA or producing bills for it to get  LTA Exemption:

Can We Claim LTA Every Year?

One of the most common questions about LTA is whether it can be claimed every year or not? The answer is Yes – you can claim LTA every year, but you will not be able to claim LTA exemption ever year.

Other Points About Tax On LTA

1. If you do not wish to claim LTA in one particular year you can have your employer carry forward your LTA for the next year.
   
2. For getting LTA tax exempt you will have to produce bills, but you can’t get your LTA exempt every year.
   
3. You can get your LTA exempt twice in a block of four years. Right now the block that is relevant is 2006-2009. This block is decided by the Government so does not have a bearing on when you start your job and also these blocks are calendar years and not financial years.
   
4. The bills can be air, rail or even a private rental company however the exemption is only for domestic travel so an international ticket won’t do.
   
5. The bills have to be for a journey that has been undertaken when you are on leave and should be for you and your family that is spouse, children and dependant parents, brothers and sisters. Its obvious that your family can’t claim the exemption if you have not accompanied them.
   
6. If you and your wife both get LTA – both of you can’t claim exemption for the same travel but you can avail exemption independently for different travels. So effectively between the two of you, you can claim exemptions four times in four years.
   
7. If for some reason you fail to claim LTA exemption in the bucket of four years – you still have the option to claim exemption in the first year of the next block.
   
8. Only travel bills can be used for LTA exemption, so a hotel bill can’t be produced for claiming LTA exemption even though you might have stayed in the hotel during your leave.
   
9. The maximum LTA for the purposes of LTA tax exemption is Rs.20,000 so normally most organizations design the salary structure in such a manner that they don’t give the employees more than Rs. 20000 as LTA.
   
10. In terms of proof for air travel – although there is no fixed rule as such, it might be a good idea to preserve the boarding pass along with the ticket to make sure there are no problems in claiming LTA exemption later on.
    
11. LTA can only be claimed for the shortest distance between two places. So if you are planning to travel from Goa to Mumbai then you will be allowed exemption on tickets from Goa to Mumbai and back. You will not be allowed to produce tickets that are via some other place like Mumbai to Hyderabad and then from Hyderabad to Goa and so forth.
    
12. LTA can only be claimed on tickets or rented private vehicles, you cannot show petrol or diesel vehicles for your own vehicles and then claim exemption on it.
    

The above are just some of the points that need to be kept in mind while discussing LTA exemptions. Because tax rules keep changing it is best to discuss with a professional before taking any decision.

We encourage you to ask questions related to LTA or any other tax or financial matter, and we would try our best to provide a solution to it.

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