Tag Archives: Income Tax Law

Leave Travel Allowance (LTA) – Rules, Exemption & Calculation


Leave Travel Allowance (LTA or LTC) – Exemption & Calculation

What is Leave Travel Allowance (LTA)?

Leave Travel Allowance (LTA) is a allowance type which is given to an employee from his employer to cover his travel expenses when he is on leave from work. LTA is exempted from tax u/s 10(5) of Income Tax Act, 1961.

Leave Travel Allowance (LTA)LTA or LTC can be broadly categorized as below in 2 parts:

1) Any travel assistance received by employee from his employer for himself and his dependent family to cover expenses incurred in travelling while on leave.
2) Any travel assistance received by employee from his former employer for himself or his dependent family to cover expenses incurred in travelling after retirement or termination of his service.

Dependent Family Members includes:

  1. a) Spouse of individual
    b) Children of individual
    c) Parents of individual (mainly or wholly dependent on the individual)
    d) Brothers and sisters of individual (mainly or wholly dependent on the individual)

Exemption Rules

  • People incur several kinds of expenses during their holiday trip but not all of them are covered by LTA. Expenses made on food, shopping, etc. are not tax deductible.
  • Only the expenses made by employee on travelling are born by the employer for which he provides LTA to the employee.
  • The individual must preserve the proof of travel as the same may be required at the time of tax auditing.
  • Exemption is allowed for only twice within a block of 4 years.
  • Amount of exemption is decided as per the mode of transportation opted for and the connectivity of the place of travel

 

What are Leave Travel Allowance (LTA) block years?

LTA block is a period of 4 years suggested by IT Department during which exemptions can be claimed 2 times during every block period.

Here is the list of the block years suggested by IT department so far:

Block no. Period
1 1986-89
2 1990-93
3 1994-97
4 1998-01
5 2002-05
6 2006-09
7 2010-13
8 2014-17

Current LTA Block Year

The current on-going block year is the 8th block year. The 4 years in this block are the years 2014, 2015, 2016 and 2017.

List of Expenses Exempt under LTA

1) In case of travel by Air

economy air fare of national carrier by the shortest route or the actual amount spent on travel whichever is less is exempt from tax.

2) In case of travel by Rail

A.C. first class rail fare by shortest route or actual amount spent on travel whichever is less is exempt from tax.

3) If the origin and destination spots of journey are connected by rail but journey is performed by other mode of transport and not air or rail

A.C. first class rail fare by shortest route or actual amount spent on travel, whichever is less is exempt from tax.

4) If the origin & destination points are not connected by rail or air (partly/fully) but connected by other recognized Public transport system

first class or deluxe class fare of such transport by shortest route or actual amount spent on travel, whichever is less is exempt from tax.

5) If the place of origin & destination are not connected by rail or air (partly/fully) and also not connected by other recognized Public transport system

AC first class rail fare by shortest route (if the journey was performed by rail) or the amount spent on travel, whichever is less is exempt from tax.

If the assesse did not use LTA provided by his employer either once or twice (the permitted limit) in a 4 years block period he can still claim LTA exemption by using LTA in the year immediately succeeding the earlier 4 years block.

Let’s understand this with the help of an example:

Suppose Mr. Ramesh claimed only one exemption during the 7th block which lasted from 2010-13. He still has one exemption remaining. So when can he claim it?

Mr. Ramesh can claim this concession in the next year, i.e. 2014 which is part of the current block. So, in the current block period (i.e. 2014-17), he can avail LTA claims 3 times in total but he needs to claim the carry over LTA of previous block in 2014 only and not later than that.

Limitations or Restrictions Applicable under LTC

  • LTC covers only domestic travel, i.e. only within India. International travel is not covered under this.
  • To claim LTA, the mode of travel should be either air, railway or public transport.
  • LTA is provided for only travel expenses.
  • Tax exemption on LTA cannot be claimed for more than 2 children on an individual. This restriction is not applicable if children are born before October 1st 1998.
  • Children born out of multiple birth after the first child will be treated as one child only. So the above mentioned restriction will not be applicable in this case also.

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Indian Income Tax Act Amendments To be Effective from 01 April 2017


Indian Income Tax Act Amendments

Income Tax Act Amendments
PC: arunjaitley.com

Government of India has made certain changes to the Income Tax Act and are going be effective from 1st April 2017.

The Indian Income Tax Act amendments are as given below:

(1) As per the new Income Tax Act Amendment, limit for payment of expenses by cash  (both, capital and revenue expenditure) reduced from Rs.20000 to Rs.10000 per day in aggregate per person.  Capital expenses paid in cash beyond the said limit will not be taken into account for depreciation purposes.  However, the cash payment limit for lorry fright etc. remains the same at Rs.35000.
(2) No person shall receive an amount of two lakh rupees or more, by cash (Sec. 269ST) —
(a) in aggregate from a person in a day; or
(b) in respect of a single transaction; or
(c) in respect of transactions relating to one event or occasion.
The penalty for violation of above is to be a sum equal to the amount of such receipt.
Examples for above –
 i) If one person sells goods worth Rs. 3 Lakh through three different bills of Rs.1 Lakh each to another person and accepts *cash in a single day* at different times then section 269ST(a) will be considered to be violated.
ii) If one person sells goods worth Rs. 3 Lakhs through *single bill* to another person and receives cash of Rs.1.5 Lakhs on day 1 and another Rs.1.5 Lakhs on day 2 then section 269ST(b) will be considered to be violated, since it pertains to the same single transaction.
iii) If one accepts cash of Rs.1.8 Lakhs for *sales* and Rs.20, 000 for *freight charges*,  then section 269ST(c) will be considered to violated even if cash is accepted on different dates, since they pertain to a single sales event.
iv) If one sells his car for Rs.3 Lakhs and receives the amount in cash, then penalty levied on him will be Rs.3 Lakhs.
(2A)  In view of the newly introduced above said penal provisions relating to cash sales, the existing provisions (in vogue from 1.6.2016) relating to collection of TCS @ 1% on cash sales exceeding Rs.2 lakhs (Rs.5 lakhs, in the case of jewellery) are deleted.  Consequently, there is no need to collect TCS on cash sales exceeding Rs.2 lakhs.  Straight away it will attract equal amount penalty now.
(3) For below Rs.2 crores turnover cases –
-For Non Cash Sales (through Digital, Online, cheque, Bank etc.)  : Net Profit will be taken as 6% of Turnover/Gross Receipt.
-For Cash Sales : Net Profit will be taken as 8% of Turnover/Gross Receipt.
(4) Tax Exemption limit is Rs.2,50,000/- (same as earlier) –
– After that, upto Rs.5 lakh, Tax Rate is 5% (earlier it was 10%).  Tax rebate of maximum Rs.2500 will be allowed, for total income upto Rs.3.50 lakhs.
-Individuals having total income exceeding Rs.50 lakhs but below Rs.1 crore, are to pay surcharge @ 10% of the tax.  Those having total income exceeding Rs. 1 crore shall continue to pay surcharge @ 15%.
(5) Payment of Rent – Rs.50,000 per month by any Individual or HUF (not subject to Tax Audit requirements) – deduct TDS @ 5%.


(6) Capital Gain in respect of Land & Buildings –
– Periodicity for long term Capital Gain is reduced from 3 years to 2 years.
– Base year shifted from 01 April 1981 to 01 April 2001 for all assets including Immovable property.
(7) Corporate tax rate for the account year 2017-18 for companies with annual turnover upto Rs. 50 crores (in the account year 2015-16) is reduced to 25%.  No change in firm tax rate of 30%.
(8) Donations made exceeding Rs.2000 will be not be eligible for deduction under section 80G, unless these are made using modes other than cash.  Consequently, trusts accepting 80G donations may advise their donors to give donations exceeding Rs.2000 vide cheque / RTGS / digital modes.
(9) Sale of unquoted shares to be taxed at (deemed) fair value.
(10) In absence of PAN of the buyer of specified goods, the rate of TCS will be twice of the extent rate or 5%, whichever is higher.


(11)  From financial year 2017-18, if Return is not filed within due date, late fee of Rs.5000 for delay up to 31st December, and Rs. 10000 thereafter.
(12) Every person who is eligible to obtain AADHAR number, should quote such number, on or after 1 July 2017, in the Return of income. Furthermore, every person who has been allotted PAN as on 1st July 2017 must intimate the AADHAR number to the Tax Authority, failing which, PAN allotted to such person shall be deemed to be invalid.  Kindly note that linking of AADHAR with PAN is not possible, unless name as per AADHAR and PAN match perfectly.  Hence, please take steps to rectify your name as per AADHAR to match as per PAN.
(13) Where Sec.12AA registered trusts modify their objects clause, they need to apply within 30 days to CIT for approval of the modified clauses.
Hope the above information on amendments in Income Tax Act will help you plan your finances better.
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