Scorching hot summer and children’s long school holiday compels everybody to look towards a cool hill station for a snowy cold mountain and enjoy the vacation in tranquility. It not only helps in getting a better family bonding but also rejuvenates the lost body energy. Traveling at the time of vacations can be an extremely expensive affair as the air and train ticket becomes very costly due to peak season rush. To get a rescue from such problem, one can enjoy the trip freely by using LTA (Leave Travelling Allowance) benefit.
What is LTA?
The amount received from the employer for travelling in a leave is called LTA. These are also subject to conditional tax exemption. It does not cover the other expenses related to traveling such as accommodation and food bill, etc. So an LTA is only valid for the travelling expenses.
Benefits of LTA
LTA is not for the sole benefit to the employee only, but it also allows the other family members of the employee to travel along with him/her. Family in this context means spouse and dependents, i.e. parents or children even brothers-sisters. Here maximum two children are allowed for availing the benefit if they are born after 1st Oct 98, or if they are born earlier to this date, in such case, any number of children can accompany the travel. If the child is not a tax assesse and above 18 years of age, then also he/she can be included in the benefit and allowed to travel. The employee must accompany the family while availing the LTA benefit for the family. It is allowed for a travel within India only and cannot be claimed for foreign tours. Though there is no limitation on the number of trips per annum by the tax department but the employer may have specific rules regarding it so employees must check it before availing the benefits. Following modes of travelling is allowed for a valid benefit:
- By Rail Route: The fare for first class AC travel is allowed but with a condition that journey has to be made through the shortest available route.
- By Air Journey: Air fare for economy class is allowed as benefit.
- Other travelling styles allowed: If the other mode for travelling is available and recognized by the government, such as the public bus then one can claim a rent equivalent to the first class rail journey.
One can get the LTA benefit up to two times in a block of four calendar years. The block of four years has been prescheduled i.e. current block being 2010 to 2013. If due to some reason one cannot avail the LTA benefit, then he/she can carry forward up to one LTA to first year of subsequent block.
Want Cash for LTA?
The LTA also allows getting money by surrendering the LTA benefit. However, the money received against such a benefit would be entitled to Income tax as per slab rates applicable. Suppose, if you have spent Rs 10,000 out of Rs 14,000 LTA, then you have to pay tax on Rs 4000 received as unutilized LTA.
Everybody confuses when it comes to deciding on using the LTA. If one is planning to travel, then it is better to use the LTA, because you can use the money without paying tax on it. If you get money against the LTA and then first you have to pay tax on it thereafter you can use the amount for travelling. So it is advisable to use LTA if you have planned a travel and exchange it with money only if you have another plan in mind.
About the author:
Amit Sethi is an MBA (Fin) graduate and a Financial Consultant. He has spent 9 years in Equity research, Stock broking and Financial Consultancy Sector. He can be reached at email@example.com
Income Tax Calculator