It is the time of the year to take that much-needed vacation that will relieve you from all the stress! But here’s the hitch - vacations can be expensive. Plane tickets, hotels, eating out, and all the exciting stuff you want to do can put a dent in your wallet. Don’t worry, though; there’s a saving opportunity in the form of Leave Travel Allowance (LTA).
LTA, or Leave Travel Allowance, is an allowance employers give to their staff for vacations within India, whether they travel solo or with family. The good news is, that it’s tax-free for employees, as long as they meet certain tax law conditions. But, before you start packing your bags and planning your trip to enjoy these tax benefits, there are some important factors you should know about.
What are the key conditions?
- You must have actually traveled to claim the exemption.
- The exemption applies only to domestic travel; international travel isn’t covered.
Who along with you are covered under LTA?
You and your immediate family including your spouse and two children if born after 1st Oct 1988 will be covered. This constraint is not for children born before 1st Oct 1988. You can also cover dependent members of the family like parents and siblings under LTA.
What expenses can you claim?
The exemption applies specifically to your actual travel costs, such as airfare, train fares, or bus tickets. Expenses like local transportation, sightseeing, hotel stays, and meals are not covered. Keep in mind that the exemption amount is limited to what your employer provides as LTA.
For instance, if your employer grants you Rs 40,000 as LTA, but your actual travel expenses amount to Rs 25,000, only the Rs 25,000 will be exempt from taxes. The remaining Rs 15,000 will be included in your taxable salary income.
There are different limits on the mode of transport used for traveling, you can read more on the specific exemption limits here!
Can LTA be claimed on every vacation you take?
No, an LTA exemption is available for only 2 journeys performed in a block of four calendar years. The current block for leave travel is from 2022 to 2025.
If an exemption is not availed during the block period, it can be carried over to the next block and used in the first year of the next block.
What if you travel to multiple locations in a single journey?
Now, let’s say you take a week-long vacation where you’ll start by visiting New Delhi, the capital city, then the Taj Mahal in Agra, and plan to end it by watching the sunset at a fort in Jaipur. What all travel expenses will be exempt then? In such a case, for LTA calculation, only the fare from your place of origin to the farthest point via the shortest route is considered for exemption.
How to claim LTA?
To claim an exemption on Leave Travel Allowance, you can follow these steps:
- Fill out Form-12BB: Fill out the necessary details about your travel during the financial year.
- Provide Supporting Proof: Submit evidence to support your claim. This can include boarding passes, air tickets, train tickets, or invoices from travel agents, among others.
Form 12BB is basically a declaration of your investments that you submit to your employer. It is submitted at the end of the fiscal year, usually in January or February, along with documentation of your investment.
Have questions? Ask away!