Leave Travel Allowance (LTA) is granted by the employers to the employees as a part of the remuneration to provide for travel expenses incurred during the year. LTA also covers such expenses of the spouse, children as well as dependent parents and siblings. However, there is a restriction. The allowance is restricted to two children born on or after October 1, 1998. There is no restriction on the number of children born before this date.
What are the expenses that LTA covers?
LTA only covers travel expenses incurred on travelling with your family within the country. The exemption can be only claimed if it is within the country under Section 10(5) of the Income-Tax Act. Some other expenses which cannot be included are expenses on hotel rooms, sightseeing, food, etc.
Another condition is that you must make sure to opt for the shortest possible route, only then can you claim expenses. There is also a restriction on the fare component.
Tax exemption can only be claimed for economy class air fare, first class AC rail fare or first or deluxe class bus fare. However in the absence of public transport, you can hire a taxi or rent a car and claim for expenses equivalent to the first class AC rail fare.
Can the entire amount be claimed as an exemption?
Yes, provided that the entire amount has been spent according to the tax rules specified under LTA laws.
Can you claim LTA every year?
While you can claim LTA every year for which you will be taxed, LTA exemption can only be claimed twice in a block of four calendar years.
Can the two year LTA entitlement get added together?
It does. If you are entitled to an LTA of Rs 10,000 per year and do not utilise it for the the first year it is carried forward to the next year. In the second year, you can claim the entire amount (Rs 20,000) as tax exempt provided you spend it, according to the specification in LTA tax laws as detailed above.
Carry over concession for LTA comes with a carry forward feature. You can carry forward your LTA in the situation that it has not been used. It can be brought forward and claimed in the first year of the next block.
Is there any travel proof required for LTA?
The Supreme Court announces that there is no need to submit proof of travel in order to claim LTA. The employers while assessing the travel allowance claims, do not need to collect proof of travel to submit to the tax authorities. Though it is not mandatory for employers to demand proof, they still have the right to demand documentary proof depending on its policy. The announcement by the SC has only moved the responsibility from the employer to the employee, the assessing officer can still ask for the employee to provide details of travel.
Can both spouses claim LTA?
If the husband and wife are benefiting from LTA benefit in their respective offices, then both have the option of claiming LTA exemption from their employers. They can also get the benefit of four journeys in just one block. There is no need to make sure that they do not travel twice in the same year. Also, as long as they adhere to the definition of family members, it does not matter whether they choose to take the same family members or different ones.
The family in this case consists of spouse, children, siblings and parents who are dependent on you. In the case of children, who are born on or after October 1, 1998, the exemption will be restricted to only two surviving children. The only exception for this is if after the birth of the first child, the second conception results in multiple births (twins or triplets).
If both spouses travel together, can they both claim LTA simultaneously?
No, both spouses cannot claim LTA simultaneously. LTA cannot be claimed twice for the same journey.
(The writer is the CEO of bankbazaar.com)