Leave Travel Allowance(LTA/LTC), How to use for Holidays and Travelling Free

What is Leave Travel Allowance (LTA)/Leave Travel Concession (LTC)?

When it comes to saving tax, Leave Travel Allowance/Leave Travel Concession is one of the best friends that an employee can have. Leave Travel Allowance is an income tax exemption offered by an employer to his employee. As per this, the employer reimburses the travel expenses for the vacation taken by an employee. However, any other expense, such as food, shopping, lodging, etc., is not included in the exemption.

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Who are considered as family members for LTA exemption?

The exemption is applicable whether you are traveling alone or with your family. So the travel expenses for your family are also reimbursable by your employer and are tax-FREE! But here's the thing: the Income Tax Department has described the word family. But For the purpose of the Income Tax Act and LTA, a family consists of:

• Spouse;
• Children;
• Dependent Parents;
• Dependent brothers and sisters.

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How to Claim LTA/LTC

It couldn't be easier. You just need to fill in the details in Form 12BB and submit the proof of your travel like the boarding pass, rail tickets, travel agent's invoice, etc. However, there's a red flag here. Many employers do not provide for LTA/LTC in the salary structure of the employee. So don't forget to check with your employer before you consider claiming LTA/LTC.

Here are the Preconditions to Claim LTA:

Of course, like everything else, there are some preconditions to claim Leave Travel Allowance/Leave Travel Concession exemption as well:

• The exemption is only on actual travel costs;
• Available for only two children of an individual born after October 1st, 1998, including a step or adopted child;
• Traveling Twice in a block of Four years is allowed. The current block is 2014-17;
• Mode of travel should be air, rail, or any other public mode of transport;
• Allowed for domestic travel and not for international travel.

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Understanding Fare Exemptions

The fare is exempt as per the following conditions:

1. If you are traveling by air, the price of an economy class ticket for the shortest route or the amount actually spent on airfare, whichever is lower in amount, or
2. If you travel by rail, the First class ticket for the shortest route or the amount actually spent on train fare, whichever is lower, or
3. If you, however, want to travel by any other mode -the exemption is limited to first-class, deluxe, or AC first-class fare by the shortest route.
4. However, if you have traveled via. an unrecognized public transport system, then you can claim an amount equal to the AC first-class rail fare by the shortest route as if the journey had been performed by rail.

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LTA LTA/LTC: What You Need to Know to Maximize Your Tax Savings

You can carry forward your LTA/LTC:

Yes, you read it right! The government lets you carry forward your unclaimed LTA to the first year of the next block. This means if you have claimed only 1 LTA in the previous block of 4 years, you can carry forward and utilize the 2nd LTA and claim it in the first year of the next block. However, if you are unable to claim it in the first year, you will lose the opportunity.

Suppose the 4-year block for your LTA is 2014-2017. During this period, if you have not claimed your LTA or if you have claimed it only once, then you will be allowed to carry forward 1 LTA to 2018 (first year of the next block, i.e., 2018-21). However, If you do not claim it in 2018, it will lapse.

What if you have 4 Children?

The applicability of restriction of two children, in such cases, is different. If, after having one child, you have more than 1 child (twins, triplets, quadruplets, etc.) on the second occasion, then they are considered as one child for the purpose of LTA. Thus, such expense on their travel ticket is allowed.

Block Year is different from Financial Year

Yes, These block years are different from Financial Years and are created by the Income Tax Department. The current block is 1st January 2014 – 31st December 2017.

The beaches of Goa are calling you! Or will it be a chill trip to Andaman and Nicobar with your family this time around? Forget all about the world and travel like that Wanderlust in you! Still not sure how to calculate and claim LTS/LTC? Get the help of our tax experts; Book Book eCA Now!

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