Maximizing Your Tax Savings: A Great Opportunity to Save Income Tax!

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Leave Travel Allowance (LTA) lets companies reimburse their employees and families for travel expenses within the country during holidays. The money received as LTA is not taxed.

Travel, spend money, and get a tax break for you and your family. It may be hard to believe, but this is a fantastic way to save on income tax. This opportunity is available for employed individuals and is called the leave travel allowance (LTA). Your company provides this allowance, and you can get a tax exemption for your travel expenses. If you haven’t taken advantage of this tax exemption yet, give it a try this time.

It’s crucial to know the LTA’s terms.

Leave Travel Allowance (LTA) is a benefit provided by companies that covers the costs of employees and their families when they travel within the country during holidays. The money received as LTA is not subject to taxation. Section 10(5) of the Income Tax Act 1961, along with Rule 2B, outlines the criteria and requirements for receiving tax-free money through LTA. Let’s now explore the conditions that need to be met in order to qualify for this tax-exempt allowance.

Who benefits from the LTA?

As per the Income Tax Act’s Section 10(5), you can get an exemption on the LTA amount received from your current or former employer if specific conditions are met. This exemption is applicable only for employees receiving LTA from their employer, meaning self-employed individuals cannot avail of this benefit. The actual LTA amount is determined by your job position and title assigned by your company’s HR department.

The benefit is only available for travel costs

To receive money from LTA without having to pay taxes, you need to follow these steps: take leave from your job, then go on a trip within the country by yourself or with your family. You can only request reimbursement for travel expenses under LTA. You can claim either the maximum amount set by your employer or the actual expenses you incurred on travel, whichever is lower. Tax expert Balwant Jain explains that LTA only covers travel fare while visiting another part of the country. It does not include expenses for hotel stays or food.

Traveling with LTA Conditions

You can travel alone or with your family. But if your family goes on a trip without you, you won’t get the LTA benefit. To avail LTA, you must be on leave from work during your travel. If you are on a business trip and bring your partner or child, you won’t be eligible for LTA because those days are considered business days, not holidays. LTA includes your spouse, children, or parents as family members. According to the Income Tax law, you can only claim LTA exemption for up to two children born on or after October 1, 1998; this rule doesn’t apply to children born before that date.

What is LTA grace period?

LTA can be claimed twice in a period of four years. This period is fixed and not based on when you started your job. If both the husband and wife work, the family can go on a trip every year and both of you can receive tax-free money for two different years.

Carry forward LTA benefits

Some money you didn’t get in your income tax return can be saved for later, and the same goes for travel allowance that you didn’t claim in a certain period. For example, if you couldn’t claim your travel allowance between 2020 and 2023, you can still use it in the first year of the next period, starting in 2024. This means you can use the travel allowance that you missed in the 2020-2023 period during the 2024-2025 period, and it won’t affect the four-year period from 2020 to 2023.

How to Get LTA When Leaving a Company

If you change jobs and travel for work, you can get reimbursed for your travel expenses from your current employer. Remember that you can only get tax-free reimbursement for travel expenses twice in a span of two years. So, even if you travel after leaving your job, you can still get your travel expenses reimbursed as long as your employer allows it.

What documents do I need?

To get an exemption from income tax, you need to keep your travel ticket safe. If you rented a car, the receipt or invoice from the travel agency or car rental agency will be accepted as valid evidence.

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