I got this question in a comment the other day, and I phoned up my CA friend to ask about this.
He told me that a holiday package can be claimed for LTA exemption, but the only thing to keep in mind is that LTA exemption is for spouse, dependent children, dependent brothers or sisters only, so if you have taken a holiday with your extended family or children who are no longer dependent on you, then you can’t claim LTA exemption on that part of the expense.
Another thing is that since LTA exemption can be claimed only for travel – if your holiday package included hotel and sightseeing (which it normally does) – you won’t be able to take an exemption for that.
I thought this is a good opportunity to update my old post on LTA tax, so here is that post updated with new information.
The following points need to be kept in mind while taking the LTA or producing bills for it to getÂ 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 â€“ you can claim LTA every year, but you will not be able to claim LTA exemption ever year.
Other Points About Tax On LTA
- 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.
- A supreme court judgment said that it’s no longer mandatory for employers to collect travel bills.
- You can get your LTA exempt twice in a block of four years. Right now the block that is relevant is 2010 – 13. 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.
- The bills can be air, rail or even a private rental company however the exemption is only for domestic travel so an international ticket wonâ€™t do.
- 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. Your family canâ€™t claim the exemption if you have not accompanied them.
- If you and your wife both get LTA â€“ both of you canâ€™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.
- If for some reason you fail to claim LTA exemption in the bucket of four years â€“ you still have the option to claim exemption in the first year of the next block.
- Only travel bills can be used for LTA exemption, so a hotel bill canâ€™t be produced for claiming LTA exemption even though you might have stayed in the hotel during your leave.
- 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.
- 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.
I never liked tax, and have never been good with it, so there are many chances of a mistake, so please correct me if you see anything wrong.
Let me give you an example of why I don’t like tax. Here is this thing from the Income Tax Act that tells you how many children you can claim exemption for:
Yes. Exemption of L.T.C. shall not be available to more than two surviving children of an individual after 1 st October 1998. However, this shall not apply in respect of children born before 1.10.98 and also in case of multiple births after one child. If an employee has before 1.10.98 even five children or more, exemption would still be available to all children. However, if an employee begets a third child after 1.10.1998, the L.T.C. for the third child will not be exempt.
You can thank them for not suggesting adoption!