LTA: Take leave, go travelling, spend money and get exemption in Income Tax... this is also a great way...
How nice it would be to hear that you can take a holiday, travel, spend money, and get an exemption in income tax, and that too with the whole family. Surely you will not believe it. But, the reality is that this is a great way to save income tax. This is for employed people. This allowance is called leave travel allowance. LTA in short. Its benefit is provided by the company. Tax exemption is available on billing. If you have not used it till now to save tax exemption, then try it this time.
It is important to understand the terms of LTA
Leave Travel Allowance (LTA) gives you such a facility. LTA actually compensates the expenses incurred by the companies when their employees and their families travel somewhere in the country during holidays. The money received as LTA is tax-free. Section 10(5) of the Income Tax Act 1961, along with Rule 2B, explains the exemptions available on LTA and its conditions. Let's look at the conditions for availing tax-free money from LTA.
Who gets the benefit of LTA?
According to Section 10(5) of the Income Tax Act, the amount of LTA received from your previous or present employer is eligible for exemption subject to fulfillment of certain conditions. Meaning, that this benefit will be available only to those who are employed and who get LTA from their employer. This simply means that self-employed people do not get the benefit of LTA. The amount of LTA depends on your rank and designation given by the HR department of your company.
Benefit is available only on travel expenses
To get tax-free money from LTA, it is important that you first take leave from your office and then go on a trip somewhere in the country alone or with your family. You can claim only the expenses incurred on travel as LTA. In LTA, you can claim only the maximum amount given by the employer or the expenses incurred on travel, whichever is less. According to tax expert Balwant Jain, under LTA, only the expenses incurred in the form of travel fare while visiting the country can be claimed. The cost of hotel stay or food is not included in this.
Conditions for travel by LTA
You can travel alone or with your family. However, if your family travels without you, you will not get the benefit of LTA. You must be on leave from the office at the time of travel. If you are on a business trip and have taken your life partner or child with you, then you will not get the benefit of LTA. Because, in those days you are not on holiday but on a business trip. In LTA, family means husband, wife, children, or parents. As far as Income Tax law is concerned, you will get LTA exemption only on two children if their date of birth is on or after October 1, 1998, this rule does not apply in the case of children born before that.
What is the LTA grace period?
LTA can be claimed twice in a block of four calendar years. This block is not calculated from the beginning of your job, rather it is pre-determined. If both husband and wife are employed, the family can travel every year and both of you can get tax-free money every year for two different calendar years.
Carry forward LTA benefits
Some losses of income tax return can be carried forward, similarly, unclaimed LTA in a block can also be carried forward. For example, if for some reason you have not been able to claim LTA for the block of 2020-2023, then it can be carried forward in the first year of the next block starting from 2024. Meaning, that you can carry forward the LTA arrears of the current block of 2020-23 and claim it in the block of 2024-25, it will not affect your four-year block of 2020-23.
How to claim LTA while leaving the company
If you are switching jobs and traveling while working with the company, you can claim LTA from your current employer. It should be kept in mind that your travel plan for tax-free LTA should not be more than two in 2 years. Therefore, if you travel after resigning, you can claim LTA, the condition is that in such a situation your employer gives LTA.
Which documents will be required?
To claim income tax exemption, you will have to keep the travel ticket safe. If you have rented a car, the receipt or invoice from the travel agency or car rental agency will be considered valid proof.
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