You must realize that there are a few personal expenses on which you can get tax exemptions. These expenses likewise get deducted from your pay structure. You should cross-check this with your HR division. If you have to make your expenses tax free then you are required to furnish the genuine bills of your expenses. You are qualified to get leave travel allowance from your employer. Leave Travel Allowance (LTA) is a kind of allowance which is given to the employee by his employer to cover his travel costs when he is on leave from work. Occasionally it is also called Leave Travel Concession (LTC). Leave Travel Allowance is absolved from the purview of tax under section 10(5) of Income Tax Act, 1961.
LTA and its classification
Leave Travel Allowance can be extensively sorted into two types-
1) Any travel concession or help received by an employee from his employer for himself and his family to cover costs brought about in traveling while on leave.
2) Any travel concession or help received by an employee from his previous employer for himself or his family to cover costs brought about in traveling post retirement or end of the administration.
The definition of ‘Family’ includes spouse, children, parents, and brother (dependent on the individual) or sisters (dependent on the individuals).
Terms and Condition to Avail LTA
- Leave travel allowance could be availed only twice in a period of four years.
- You are required to travel in the time period while you are on the leave.
- You are required to travel from the shortest route available to your destination of which you are claiming LTA.
- One more condition is required that you should travel within the boundary of India.
- A claim could be made for an AC-I compartment of train Journey and for Air travel you can claim only for the economy class.
List of expenses exempted under LTA
1) If you are traveling via Air – If you are traveling by economy air fare of national level carrier than the actual amount spent on travel or the fair of shortest route whichever is less is excluded from tax.
2) If you are traveling via Railways – If you are traveling by rail then the fare of A.C. first class or actual amount that is spent on travel whichever is less is excluded from tax.
3) If the origin and destination spots of the trip are associated by rail yet travel is performed by another method of transport and not air or rail – At that point A.C. first class rail charge by shortest route or genuine sum spent on travel, whichever is less is excluded from tax.
4) If the origin and destination points are not associated with rail or air (mostly/completely) but rather associated with other perceived public transport framework – At this point, first class or deluxe class charge of such transport via the shortest route or genuine sum spent on travel, whichever is less is excluded from tax.
5) If the place of origin and destination are not associated by rail or air (somewhat/completely) and furthermore not associated by other perceived Public transport framework – In this case, AC first class rail fare by shortest route (accepting that the adventure was performed by rail) or the sum really spent on travel, whichever is less is excluded from tax.
In the event that the assessee did not utilize Leave Travel Allowance given by his employer either more than once (as far as possible) in 4 years square period then he can at present claim LTA exclusion by utilizing LTA in the year instantly succeeding the 4 years piece period. It is known as carrying over concession.
An Example to Understand how LTA is Calculated
Suppose Mr. Prakash, an employee of Infographics Pvt. Ltd. traveled from Patna city to Nagpur city and came back through the business class flight. His total expense on air tickets was Rs. 30,000. The economy class air fare for the return journey is Rs. 10,000. His employer reimbursed Rs. 30,000 to him. How much of his LTA be exempted from tax?
Solution: The air fare of economy class is lower than the actual amount of money spent on tickets. Therefore, only Rs. 10,000 will be exempted from tax and remaining Rs. 20,000 will be added to his taxable income.