What is LTA?
When you need to take a trip, your employer may give you an allowance called the leave travel allowance or LTA. The LTA is not part of the taxable income. Income tax exemption under Section 10(5) refers only to an allowance that an employer provides to his employee while he is travelling on leave from work and not any other allowances he may receive during his travel. So all allowances such as daily allowance, conveyance allowance etc. should not be taken into consideration while computing income tax exemption under this section. Only actual expenditure incurred by an employee on account of travel will be eligible for income tax exemption under Section 10(5) of the Income Tax Act
How to be eligible for LTA?
The necessary factors to become eligible for LTA include:
- You can claim LTA only on the costs you incur for travel. You can claim for LTA irrespective of whether you travel by air, road or rail
- You need to submit proof of cost to claim the allowance
- Expenses that are not part of the travel like food or stay cannot be included in the LTA
- You can only claim LTA for domestic travel and not for international travel
- LTA cannot be claimed every year. In a block of 4 years, you can only claim LTA for two travels
Note: Any unused LTA can be carried over and claimed in the next block however, you must claim it in the first calendar year of the succeeding block.
What kind of expenses can be included in LTA?
You can get exemptions on your travel expenses only if you meet the following criteria:
- If travelling by train: You can claim an exemption for the amount equal to the fare for the first-class AC if going by the shortest route or the actual amount spent whichever is less.
- If travelling by air: You can claim an exemption for the amount equal to the fare for the national carrier which is air India if going by the shortest route or the actual amount spent whichever is less.
- If travelling by other modes:
- In case there is no rail connection between the origin and the destination then you can claim exemption for a fare of the first class or deluxe class of the mode of transport available or the actual amount spent, whichever happens, to be less
- In case there is no recognised medium to travel the route then you can claim an exemption for an amount equal to the first-class AC railway fare of the same distance.
Is it mandatory to submit the bills for claiming LTA?
The question is best answered by putting the onus of responsibility of travelling on the person who is travelling. Hence, if you want to claim tax benefits under the LTA (Local Tax Allowance), then you should keep the travel cost bills and present them if asked.
Terms like LTA and epf correction form are something you hear about every day at your job however, as human tendency goes we ignore until we actually need to know about it. Hopefully this article clears up some of your doubts. You can visit Khatabook as the articles over their describe in detail the epf correction forms and other such terminologies.