LTA Exemption: Rules that you must know before claiming income tax filing benefits

LTA Exemption Rules: We are in lockdown mode due to the Coronavirus pandemic and travel is not allowed, but many of us must be craving to go on a vacation to kill this boredom. In normal times, Government of India (GoI) too wants you to travel and promotes inland tourism via Leave Travel Allowance (LTA) scheme. Good thing is that income tax laws provide tax exemption in respect of LTA received by salaried taxpayers from their employers subject to fulfillment of certain conditions. So, when lockdown is over and you head for a holiday, know here what you should really pay attention to in order to save money. Ultimately, you will be claiming LTA and investment experts suggest some tax benefits rules that you must know before putting in your claim.

Speaking on the conditions for availing of the LTA benefit, Mumbai-based tax and investment expert Balwant Jain said, "The LTA benefit can be claimed by you when you are proceeding to any place in India either on holidays or on your retirement or termination. The retirement may either be on you leaving the organisation for any reason. Retirement for this purpose not only includes the mandatory retirement on reaching the age of superannuation, but also includes leaving employment to take up another employment. In case of retirement for taking another job the LTA may be received from your old employer or from new employer."

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Jain said that a salaried individual can claim LTA exemption twice in a block of four calendar years. This block is not calculated with reference to commencement of your employment, but is predefined by the law. The current block began from January 1, 2018, and will end on December 31, 2021. The next block will be from January 1, 2022, to December 31, 2025, and so on. It is not necessary for you to claim LTA exemption in alternate years.

On what can be claimed for tax exemption under LTA expenses, Kartik Jhaveri, Director — Wealth Management at Transcend Consultants said, "Tax benefit on LTA can be claimed for travel in India only. Any expenditure incurred by you on local travel or hotel accommodation is not eligible for LTA exemption." He added, "You need to preserve the tickets to claim this income-tax (I-T) benefit. If you hire a car, the receipt or invoice from the travel agency or car rental agency is considered valid proof."