The whole object of travel is not to set foot on foreign land; it is at last to set foot on one's own country as a foreign land. ~G.K. Chesterton
The above quote shows you the importance and enjoyment of exploring your own country. The government wants to promote inland tourism and has provided for tax benefits in respect of leave travel assistance received from your employers. In this article I will explain the present provision of LTA.
This tax benefit is available only to persons who are in employment and is not to persons who are self employed. You can claim tax benefits on the LTA received from your present or past employer on fulfillment of certain conditions.
The exemption in respect of LTA can be claimed under two circumstances. Firstly you can claim it when you are continuing in your present employment and proceed on leave to any place in India. The other situation when you can claim LTA exemption is when you travel to any place after your retirement from the services or on termination of services. This benefit on retirement can be claimed every time you leave one employment and move to other location to take up another employment. So the retirement for this purpose not only includes the mandatory retirement on reaching the age of superannuating but also includes leaving one employment to take up another employment at different location.
- For whom you can spend the money:
You can either travel alone or with your family. However, if your family travels without you, no LTA benefit can be claimed. Moreover you need to be one leave on the days of travel. You cannot claim the benefits of LTA in respect of your spouse or child if you take them along with you on your business trip as you are not proceeding on leave but going for official visit. Family for the purpose of claiming LTA exemption includes spouse, children whether dependent on you or not and parents, brothers and sisters who are wholly or mainly dependent on you. The income tax law provides that you can claim this LTA exemption benefit in respect of two children only.
- How frequently you can claim this exemption:
You can claim the LTA exemption twice in the block of four calendar years. This block is not calculated with reference to commencement of your employment but is predefined by the law. The current block has begun from 1st January 2010 and will end on 31st December, 2013 The next block will be from 2014 to 2017, and so on. It is not necessary that you claim the LTA exemption in alternate years, what is required is that you can not claim it more than two times in the defined block of four years. In case you and your spouse both are working, your family can travel every year and claim the tax benefit of LTA every year for two different calendar years in case of both of you. The only restriction is that you can not claim LTA exemption for the same journey.
- Carry forward of LTA / LTC Benefits
What if you could not fully claim LTA / LTC exemption for some reason during the block 2006-2009? It can be carried forward to the first year of the next block of 4 years. Thus, in the current block of 2010 to 2013 you can claim the benefits of your arrear of LTA during the calendar year 2010 without affecting your right to claim two LTA exemptions in balance three years of the same block.
- What is the amount you can claim as exemption
The tax benefit is available only in respect of cost of transportation incurred by you on traveling in India. It is not available for expenses of stay in hotel or local conveyance for sight seeing etc. In case you are going on a foreign trip, you can claim the expense of travel from your place to the point of departure from India for undertaking the foreign travel and back. The exemption is restricted to actual expenses incurred by you in undertaking the journey from the starting point to farthest destination. However there is a cap on maximum amount you can claim in respect of LTA exemption. The restrictions are dependent on the mode of transport chosen by you and are as under:
|S.N.||Mode of transport||Maximum Limit on Expenses|
|1||Air||Economy fare being charged by the national carrier to the destination taking the journey by shortest route. |
|2.||Train||Economy fare being charged by the national carrier to the destination taking the journey by shortest route. |
1. If the destination is not connected by air or rail, you can claim the exemption maximum up to amount charged by any recognized public transport operator for 1st class or deluxe class fare operating on that route.
2. If there is no such recognized public transport system operating on that route you can claim a fare equivalent to air-conditioned first class fare for the distance between your place to destination by shortest rail route.
The exemption is available for the farthest place by shortest route when a circular journey is undertaken.
- Documents to be preserved:
You need to preserve the tickets to claim this income tax benefit. If you hire a car, the receipt/invoice from the travel agency or car rental agency is considered valid proof. After the recent Supreme Court decision in L & T limited, your employer may not verify and collect the proof of the expenses in respect of LTA still you are under an obligation to produce it before the assessing office at the time of your income tax assessment.
To traveling is not only is a holiday good for health but can also result into some tangible tax benefits.Read More post By [Balwant Jain] [BUDGET-2017]
(The author is a CA, CS and CFP. He can be reached at jainbalwant at gmail.com and @jainbalwant)