A salary package is a package which contains various components like House Rent Allowance (HRA), Conveyance Allowance, mediclaim, Leave Travel Allowance (LTA) etc. According to the income tax act 1961, an employee can claim deduction on some of these components by generating required bill to save tax. As far as LTA is concerned, employees can claim exemption on the amount spent on travel for a trip within the country under section 10(5) of the income tax act.
LTA is more like a tax saving instrument which an employee can claim by submitting bills to the finance department of his company. As per the income tax act, if an employee go for vacation for 5 or more days with family, then the amount of travel such as air/train/bus tickets or a rented vehicles is exempt from tax under section 10 of income tax act.
- An employee can claim the benefit of LTA 2 times in a block of 4 years (Current block period is 2010-13).
- For LTA, year starts from 1st January and ends on 31st December.
- You can claim LTA benefit only once in a year. So in case of multiple travels you can claim LTA for only one journey in a year.
- LTA can be carry forward to another block which means if you have not availed 2 LTA in a block of four years then you can get the benefit of the one (unutilized) in the first year of next block. So in this case you can claim 3 LTA’s (1 + 2) in a block of next 4 years.
- This claim can be availed only on travel within India (Not outside India).
- LTA only covers travel expenses like expenses of railway tickets, air tickets or rented taxi (Other expenses like accommodation bills are not entertained).
- LTA covers travel for yourself and your family. Where family, includes you, your parents, siblings dependent on you, spouse (working or non working) and children. However, this exemption is restricted to only two surviving children born on or after October 1, 1998, (unless, one birth has resulted in multiple children like twins and triplets).
- LTA offers exemption only when you travel along with your family, If your family travels without you, no LTA can be claimed.
- LTA offers exemption only for the shortest route of journey.
- LTA exemption can be claimed only upto the amount you are eligible for as per your salary package.
- If one don’t travel and take the money of LTC, the amount is fully taxable.
- One can either submit the travel bills to the company to get the claim or can get get the exemption at the time of filing you income tax return.
- The maximum amount of exemption is as under.
- Travel by air :- Economic class airfare of the shortest route.
- Travel by train :- A/C 1st class rail tickets for the shortest route.
- In case of public transport, then first class or deluxe class fare is valid.
- In case of private taxi, then A/C taxi fare is valid.