If you are planning for a trip to Kerala this summer, you may enjoy it more after reading this blog post. For, we are going totell you how you can reduce your taxable income even as you have fun with your family. Yes, you can do this by availing of the leave travel allowance (LTA) that is part of your salary. The amount paid by an employer to an employee for travelling anywhere in India, along with his family, is exempt from tax subject to certain provisions and you can use it for enjoying your holiday and save tax at the same instant.
LTC is different from LTA in LTC some part of the Travel Concession will be given by company and the balance is bared by the individual, it also depends upon the company policy.
What you are entitled to
LTA van be claimed only if you have applied for leave from your company and have actually travelled. However, international travel is not valid. You must have travelled within the country.
Only the expenses you have incurred on travelling with your family within the country can be claimed as exemption under Section 10(5) of the Income Tax Acteven though you may have a high LTA as a part of your salary.
Expenses on hotel rooms, sightseeing, food, etc, cannot be included. This means that you cannot claim exemption for the money you spent on your stay at a five-star hotel.
The family can comprise your spouse, two children, brothers, sisters and parents, if they are dependent on you. You cannot claim for more than two children unless the second birth has resulted in multiple children.
Expenses can only be claimed for travel by the shortest possible route and Don’t think you can outsmart the taxman by taking a circuitous route to reach your destination which meanb you can go from Tamil Nadu to Kerala, but you cannot go to Delhi from Tamil Nadu and then take a flight to Kerala to claim your expenses
The tax exemption is limited to the fare component, which is economy class air fare, first class AC rail fare or first/deluxe class bus fare. However, if there is no public transport, you can hire a taxi or rent a car and claim for expenses equivalent to first class AC rail fare.
If you could not get public transport and resorted to private transport like renting a car, get a bill issued by the rental company. If the bill is not accepted by your employer, you can always file an income tax return, claim an exemption and get a refund.
If you switch jobs, you can get the LTA not only from your present organization but also from your former employer, if the concession is lying unutilized.
When you can claim
Though you are paid the travel allowance in your salary every financial year, it can be claimed for only two journeys in a block of four calendar years, which are fixed. The block of four years are considered according to the Income Tax Act and the current one is from 2010 to 2013.If you are eligible for an annual LTA of Rs 20,000, you can claim exemption up to Rs 40,000 in a block. You cannot claim exemption of Rs 2 lakh even if you have actually spent that much.
You can claim for two journeys in the same year, provided you make no more LTA exemption claims for the rest of the block because the Act says twice in a block of four years and does not specify this cannot be dont in a single year.
If, however, you have not been able to travel during a block, you can carry forward the LTA exemption to the first year of the next block. This means you can claim for even three journeys. It is allowed for the first year of the new block, when you have carried forward exemption from the previous block. So, in the present situation you can claim in the first year of block that is 2010-2011, for a journey of previous block that is 2009. Plus you can make two more claims for this block (2010-2013).
If both you and your spouse are eligible for LTA, you can claim exemption for separate journeys. What if there are only two journeys undertaken by the family in a block? You could consider dividing the expenses. So, the husband can book the air tickets for one way and the wife can do so for the return journey but you need to ensure that there is no duplication.
Best LTC Routes in Kerala
Cochin, Munnar, Thekkady, Kumarakom or Alleppey Houseboat is an ideal route to avail your LTC in Kerala primarility because there are no train services or flight and you can claim a higher amount through taxi fare. There are other routes in Northern part of Kerala including Wyanad as well and you can check out our Kerala Honeymoon Packages or Kerala Tour Packages if you would like to claim the LTC benefit.
This blog post is based on an article in Economic Times