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LTA can be claimed only for domestic travel and is available for two journeys within a block of four years.
The last date for submission of investment proofs for availing tax deductions for the financial year 2023-2024 is March 31, 2024.
If your office's human resource personnel has asked for them, remember to submit your proofs for Leave Travel Allowance (LTA) tax benefit, too, if you qualify.
The Income-Tax (I-T) Act, 1961, offers various tax exemptions to both public- and private-sector salaried workers.
One key exemption is the LTA, designed to cover travel expenses incurred by employees during their leave.
"LTA is a part of an employee's salary structure and qualifies for income-tax exemption under Section 10(5).
This unique feature allows salaried employees to deduct the LTA from their taxable income, resulting in potential tax savings," says Vanshika Rana, associate, PSL Advocates and Solicitors. Of course, some conditions apply.
Adds Naveen Wadhwa, vice president, research and advisory, Taxmann: "The allowance is exempt from tax to the extent of actual expenditure incurred for journeys undertaken in India by the individual and their family. Any unutilised amount is taxable as a perquisite in the hands of the employee."
Who can claim LTA?
The tax exemption under LTA can only be availed by the employee and their immediate family members (including spouse, children, wholly or mainly dependent siblings, or parents).
"Only those individuals are eligible to claim this allowance who have LTA as a part of their salary package. And the benefit can only be claimed if the employee has actually gone on leave and travelled," says Kunal Veer Chopra, associate, SKV Law Offices.
Conditions for claiming LTA
LTA can be claimed only for domestic travel and is available for two journeys within a block of four years.
Any unused LTA from a block can be claimed in the first year of the next block.
It expires if not claimed within that timeframe. The current block is 2022-2025 (January 1, 2022, to December 31, 2025). Exemption can be claimed only for one trip in a calendar year.
"Exemption is only on actual travel costs, excluding lodging, food, and other incidental expenses," says Ritika Nayyar, partner, Singhania & Co.
The exemption is not for the entire expenditure but up to the extent of LTA provided by the employer.
Multi-destination journeys
Specific rules apply if the employee travels to multiple destinations during a vacation.
"If an employee travels to different places during a single vacation, the exemption can only be availed for the eligible travel cost from the place of origin to the farthest place visited during that vacation by the shortest possible route," says Chopra.
Most economical mode eligible
The I-T Act imposes a restriction on the class of travel for which you can avail LTA.
"The most economical mode of travel (bus, train, or air) is considered for exemption for your specific journey," says Nayyar.
The idea is that the tax benefit should not cover luxury or higher-cost options.
For air travel, the eligible amount is the economy class airfare of the national carrier (Air India) for the shortest route to the destination.
For rail travel, the AC first-class fare by the shortest route to the destination is eligible.
If the destination is not connected by rail, the fare of any other mode of public transport is considered.
If public transport is not available, then AC first class rail fare for the distance to the destination by the shortest route is considered (as if the journey was undertaken by rail).
Maintain proofs
While children are eligible, Rana warns that LTA tax exemption cannot be availed for more than two children born after October 1, 1998.
"An individual should maintain a logbook and should have tickets and other proof of travel. He should also make the mandatory declaration," says Alay Razvi, partner, Accord Juris LLP.
Remember, if a journey includes a segment outside India, it cannot be considered as travel within India, even if it starts and ends in India, and is not eligible for LTA benefit.
Feature Presentation: Aslam Hunani/Rediff.com
