Tag Archives: Income Tax

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.

For more information on Income Tax and other topics related to Finance, please visit our Business & Finance Section.

Ways to save taxes for salaried professionals


Tax planning is always there on everybody’s radar. People always look out for avenues and ways for tax savings and deductions. So if you are one of those guys, then these Tax Savings Tips might be of help to you.

  • Gifts received in the form of cash or cheque

If you have received presents/gifts in the form of cash or cheque in your marriage, then this entire gift amount is tax free.

  • Income from interest on savings bank account not taxable up to Rs. 10,000

Interest income is not taxable up to Rs. 10,000. This means if you have earned say Rs. 12,000 during the year, then you have just pay tax on Rs. 2,000 only.

  • Profit from selling shares or equity mutual funds not taxable if holding period is more than 12 months

There is a short term gain tax applicable if you earn profits from selling shares or equity mutual funds in less than 12 months from the purchase date.

  • Money you’ve inherited

There is no inheritance tax in India. So anything you get from your deceased parents or relatives as per their legal will is fully exempt from tax.

  • Bounty of options available to save Tax under section 80C

Under section 80 C, there is a maximum tax deduction up to Rs. 150,000 provided you invest in any one or multiple of the following:

  • Life Insurance Premium (LIC, HDFC Life etc.)
  • Public Provident Fund (PPF)
  • National Savings Certificate (NSC)
  • Equity Linked Savings Scheme (ELSS)
  • Principal Amount Repaid on Home Loan
  • 5 year fixed deposits with banks and post office
  • Tuition fees paid for children’s education, up to a maximum of 2 children
  • Tax saving on home loan under section 80C, section 24

Home loan offers you couple of options for tax savings/deductions. Firstly the principal amount repaid during the FY can be included in 80c, where you can claim a deduction of up to Rs 150,000. In addition to this you can claim deduction up to Rs 150,000 under Section 24.

Tax Savings Tips
Tax Savings Tips

Tax saving on education loan

Under Section 80E the interest paid on an education loan is fully non-taxable up to any amount. You can also claim this deduction if the education loan is taken for your spouse or children.

Tax Slabs for Assessment Year 2016-17 & Assessment Year 2017-18


Following are the Latest Income Tax Slabs for Individuals for Assessment Year 2016-17 (FY 2015-16) and AY 2017-18 (FY 2016-17):

1. In case of an Individual or HUF or Association of Person or Body of Individual 

Taxable income Tax Rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,000 to Rs. 5,00,000 10%
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

2. In case of a resident senior citizen (who is 60 years or more at any time during the previous year but less than 80 years)

Taxable income Tax Rate
Up to Rs. 3,00,000 Nil
Rs. 3,00,000 – Rs. 5,00,000 10%
Rs. 5,00,000 – Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
Latest Income Tax Slabs
Latest Income Tax Slabs

3. In case of a resident super senior citizen (who is 80 years or more)

Taxable income Tax Rate
Up to Rs. 5,00,000 Nil
Rs. 5,00,000 – Rs. 10,00,000 20%
Above Rs. 10,00,000 30%