Rahul Bansal
(Finalist)
(35929 Points)
Replied 31 January 2010
This is a special allowance that most salaried people get. This allowance is meant for traveling – you are expected to utilize it to spend it for tourism-related travel expenses.
It can be given out every year, or once every 2 or 4 years. Many organizations also allow you to accumulate this allowance for 2 years.
Rahul Bansal
(Finalist)
(35929 Points)
Replied 31 January 2010
The LTA / LTC that you get is fully exempt from income tax, provided it satisfies certain conditions. Here are the conditions:
The amount is actually spent on travel
You have to actually spend this amount on transportation. The spending can be for you and your family members, but you have to be one of the travelers.
Here, family means spouse and children (including adopted children and stepchildren). Parents, brothers and sisters are also included if they are dependent on you.
It has to be for transportation
The amount has to be spent on transportation – either air, rail or road.
Any amount spent for lodging and boarding is not considered. Thus, food related expenses and hotel expenses are not exempt from income tax.
Also, this exemption is for primary travel between your city of stay and your destination. Other travel expenses like taxi / cab fare, auto fare, etc. can not be claimed as exempt.
Travel within India
The travel has to be within India – foreign travel is not considered. The government wants to boost tourism within India, not international travel!
Shortest Distance and Cap on claim amount
The amount exempt would be the amount required for travel to your destination by the shortest route, depending on the mode of your travel.
If you travel by air, the maximum amount that can be claimed as exempt is the economy class air fare to your destination by the shortest route.
If you travel by rail (or road), the maximum amount that can be claimed as exempt is the air conditioned first class (AC I Class) rail fare to your destination by the shortest route.
Proof of travel
Proof of travel needs to be preserved and presented to claim this exemption. The tickets are considered valid proof.
If you arrange travel through a hired or rental car, the receipt from the travel agency or car rental agency is considered valid proof. Please note that any non-transport component (like driver allowance) is not considered for income tax exemption.
Rahul Bansal
(Finalist)
(35929 Points)
Replied 31 January 2010
LTA / LTC and Block of 4 years
Apart form the above conditions, there is one more condition that causes confusion: The LTA / LTC tax exemption can be claimed only twice in a block of 4 years.
These blocks of 4 years are predefined by the government. These are:
2002 – 2005
2006 – 2009
2010 – 2013
And so on. The current block is 2006 – 2009.
Please note that these years are calendar years, and not financial years.
Example:
If you claim LTA exemption in 2006, then, you can claim it only once more till 2009. Thus, if you claim it again in 2007, you can not claim it before 2010, as you would have already claimed it twice in the block 2006 – 2009.
However, if you do not claim LTA exemption in 2006 and 2007, you can claim it for both 2008 and 2009, and also for 2010 and 2011, as 2010 and 2011 fall under the next block of 4 years: 2010 – 2013. Thus, it is possible to claim LTA / LTC exemption for 4 years in a row!
Rahul Bansal
(Finalist)
(35929 Points)
Replied 31 January 2010
Carry forward of LTA / LTC Benefits
What if you can not claim LTA / LTC exemption for some reason?
No need to worry. The exemption doesn’t lapse – it can be carried forward to the next block of 4 years.
The only condition in this case is that the exemption has to be availed in the very first year of this subsequent block.
Thus, in this next block, you can claim a total of 3 exemptions!
Spouses and LTA
A question that is very commonly asked is: If both husband and wife are eligible for LTA, can both of them claim it?
Yes, they can very much claim LTA individually. The rules of LTA apply individually to each, which means that each spouse can claim LTA twice in a block of four years.
Thus, a family can claim LTA exemption four times in a block of four years if both spouses are eligible for LTA.
The only restriction is that both spouses can not claim LTA exemption for the same journey.
There is no other restriction: The LTA exemption can be claimed for the same family members, or different family members as allowed by the rules (as explained above). The family can in fact also travel twice in the same year, and each spouse can claim exemption for one journey.
(Note: The rules regarding claims by spouses might be slightly different in case of government employees. Please check with your organization / department to know the exact rules applicable if you are a government employee and claim LTC / LTA)
Rahul Bansal
(Finalist)
(35929 Points)
Replied 31 January 2010
Example
Let’s say you and your spouse are traveling to Bangalore from Mumbai. But instead of going from Mumbai to Bangalore, you go from Mumbai to Hyderabad, and then got to Bangalore. You travel by train in the AC 3 tier category.
The cost of AC 3 tier train tickets are as follows:
Mumbai – Hyderabad: Rs. 800
Hyderabad – Bangalore: Rs. 700
Bangalore – Hyderabad: Rs. 700
Hyderabad – Mumbai: Rs. 800
Thus, you spend a total of Rs. 6,000 for two people.
Now, the shortest route to your destination in this case would be Mumbai to Bangalore. The AC First class ticket costs Rs. 2,350 for this. So, your round trip fare would have been Rs. 9,400 for two people.
The amount exempt from income tax is the lesser of these two. Thus, in this example, even when you haven’t traveled through the shortest route, you can claim income tax exemption for the full amount of Rs. 6,000.
And what about the actual allowance that you get?
Let’s say you get a leave travel allowance of Rs. 10,000. Would it be fully exempt?
No. As we saw, the amount exempt is the lesser of the amount actually spent and the fare by the defined class through the shortest distance.
Thus, the amount exempt from income tax would be Rs. 6,000. The remaining Rs. 4,000 would be taxable, and would be included in your income.
Amir
(Learner)
(4016 Points)
Replied 31 January 2010
Diva
(Manager)
(35 Points)
Replied 31 January 2010
Diva
(Manager)
(35 Points)
Replied 31 January 2010
Amir
(Learner)
(4016 Points)
Replied 31 January 2010
Diva
(Manager)
(35 Points)
Replied 31 January 2010
Amir
(Learner)
(4016 Points)
Replied 01 February 2010
Dear Diva,
Sorry for yesterday's incorrect reply but now I have confirmed that "Local Taxi's " will not qualify for exemption..
Further, the exemption is strictly restricted to "Jouney fares" & Boarding & lodiging expenses cannot be claimed as exempt..
Sasikumar S
(Sr.Dev.Mgr)
(27 Points)
Replied 25 March 2011
I have a question.
Can i get LTA tax exemption if myself and wife travel different dates while going and return together on same day?
ex: Mywife and kid started 1 week ahead of me and i joined them at native a week later due to my no.of.leaves i had is less. however while returning we all 3 came back in same flight together.
MY EMPLOYER SAY NOT ELIGIBLE AND ALSO FEW CA CONSULTANTS ALSO SAY NOT ELIGIBLE.
however my cobrother work for finance ministry says it is eligble and a common practice for many central govt employee to send their family during summer vacation upfront and join them later and come back together. He has seen many such cases. Also he has given below ministry link on the same. pls clarify
https://www.persmin.nic.in/EmployeesCorner/Acts_Rules/ccs(ltc)/contents.htm
*** Family can perform journey separately
Where a Government servant and his family perform journeys separately, there is no objection to his presenting separate claims. In each case, however, the claim should be for both outward and inward journeys.***
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