Leave Travel Allowance (LTA)
- Author :
- TATA AIG Team
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Do you intend to take a vacation? It's time to consider how you may save money on taxes while vacationing in some of the country’s most beautiful places. Unfortunately, salaried individuals cannot afford to lose out on any tax deductions because the Income Tax Act can drastically increase their tax bills.
However, employees can use the law's available instruments to reduce their tax liability depending on the wage structure supplied by their employer. In addition to deductions, the Income Tax Act also provides exemptions that help taxpayers decrease their tax liability. One such exception is the Leave Travel Allowance (LTA).
Now you may be wondering what the LTA meaning is. You have nothing to worry about, as we will be covering every aspect of LTA in our article. It may be wonderful to think that we can claim deductions for going on a holiday, but it is true. But remember, do not get swayed looking at this and start planning your trip. You need to consider purchasing a domestic travel insurance plan for your trip. Going on a holiday without a travel insurance plan is asking for trouble.
You do not want to be stranded away from home without travel insurance. Remember, your travel insurance plan will help you if things go wrong. For example, you could get hospitalised due to an accident or miss your train or flight. Your travel insurance will aid you in getting back on track.
A travel insurance plan from Tata AIG is just what you need when planning your trip within India. It helps you enjoy your holiday without worrying about any eventualities that may come your way and disturb your vacation. Once you have insurance from Tata AIG, just focus on having a good holiday and let us take care of the rest. Also, the travel insurance claim process is simple and hassle-free in case you face an emergency on your trip.
Now that we know everything about securing our trip with a travel insurance plan, let us move our focus back to the LTA allowance and how we can claim it.
What is Leave Travel Allowance (LTA)?
The LTA full form is Leave Travel Allowance. Now that we are clear on the LTA full form let us see what it is. Leave Travel Allowance (LTA) is a stipend provided to a worker by an employer on vacation from their job to cover their travel expenditures.
LTA is a crucial part of an employee's compensation because it is free from income tax under the Income Tax Act of 1961. Therefore, the LTA earned by the employee is not included in his net income for the year per Section 10(5) of the Income Tax Act. Therefore, after understanding what is Leave Travel Allowance, let us try to understand what is LTA in your salary.
What is LTA in Salary?
If you are wondering what is LTA in salary, we have the answer for you. LTA is part of CTC and can be availed by you for any vacation you may take alone or with family. It is part of your total salary package. It is supposed to offset expenses you may incur on holiday. There are very specific conditions under which you can claim LTA exemptions.
Under What Circumstances Can I Claim LTA?
The circumstances under which the LTA exemption can be claimed are as follows.
- Only actual travel costs are eligible for LTA allowance. Under the LTA in salary, all modes of transportation, such as road, rail, and air, are claimable. The employee must present legitimate proof of cost to claim the leave travel allowance.
- Only travel expenses are eligible for LTA. Food, lodging, or other expenses not related to travel are not included.
- Only domestic travel expenses are eligible for LTA. Therefore, you cannot claim LTA for the expenditures incurred by the employee during their international trip (if any).
- It's worth noting that an employee cannot claim LTA every calendar year. Only two trips in a four-year period are eligible for LTA. The government determines the block years for LTA considerations. The calendar years 2018-2021 are currently on hold for claiming LTA. 2014-17 was the previous running block.
- The LTA is available for a maximum of two children for individuals born after October 1, 1998.
- During the time you are seeking the LTA, you must be on leave from work. The LTA allows for travel expenditures, although there are several restrictions. For example, in the case of air travel, an exemption is permitted for the fare on a national carrier utilising the shortest route or real expenses incurred, whichever is smaller.
When to Claim LTA?
When is the best time to claim the LTA? When you can save the most money by choosing the LTA option. LTA allowance can be collected for up to two years in a four-year block, and if you can't claim during that time, you can carry it forward to the first year of the next block year.
If you qualify for the LTA and have actual travel expenditures that may be claimed as an exclusion, you should take advantage of it because it can help you reduce your tax bill. It also helps you with the total expense you incur on your trip.
Preferably, claim LTA for a trip where your actual expenses are higher, and the LTA permitted in your wage structure corresponds. On the other hand, you claimed LTA for a trip with a substantially lower price than the I-T Act's travel expense limit and the LTA ceiling mentioned in your CTC. You'll have used up all of your LTA options for a meagre tax gain in such an instance. So do not only look at that you are getting a tax rebate. Instead, please wait for the opportune moment when you will make the most of this exemption and then claim it.
Now that you know LTA meaning, you must understand that LTA is a great benefit to an individual and can bring about huge savings if used correctly. Keep in mind that not all employers add LTA to the list of benefits offered, so check well if your employer is indeed offering it to you or not. If you receive this benefit and want to plan a trip accordingly, do remember to secure it with a comprehensive travel insurance plan.