With the Covid easing—the country still reporting a few hundred cases a day, the travel and tourism industry is seeing a resurgence. And, if you are one of the holiday planners, you can save tax by claiming Leave Travel Allowance (LTA) exemption.
LTA is an allowance received by an employee for personal outstation travel. LTA exemption is available for two journeys in a block of four calendar years. The current block is from 2022 to 2025. LTA availed by an employee is exempt to the extent of lower of the following: Actual cost of travel and LTA.
The actual cost of travel is limited to the air, rail or bus fares incurred for domestic travel. Expenses on local vehicle, sightseeing, lodging, food etc. are not eligible for this exemption. Note that if employees do not have an LTA component in their salary structure, they cannot claim exemption for any travel expenses.
LTA exemption is available to employees and their families, including spouse, children and dependent parents and their siblings. For example, Kahan travels with his family from Mumbai to Indore by train and spends two days in Indore. Then, he travels from Indore to Udaipur by train and spends two days there and then returns to Mumbai from Udaipur. He claims LTA as shown in the table. In case of multi-destination journey, exemption is available for the cost of travel from the origin to the most distant place of journey by the shortest route i.e. admissible claim in this case will be for direct train fare from Mumbai to Udaipur . and return. Assuming that the fare from Mumbai to Udaipur and back (each leg of the journey) is the same, the admissible claim would be 2,000 x 2 = 4,000 per person which in aggregate 16,000 for four persons.
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If an employee has not availed exemption in respect of one or two journeys in any year within a block of four years, he shall be allowed to carry forward such exemption to the next block and avail the benefit in the first calendar year. Is. successful block.
For example, Manish traveled only once during the block 2018-2021 and can claim LTA only once. During block 2022-2025, he can claim LTA for the previous block of 2018-21 in 2022. As a carry-over to 2018-2021 block instead of 2022-2025 block. For any further journeys, he will have the opportunity to claim exemption twice more in the 2022-2025 block.
So, if you have not claimed LTA twice in 2018-2021 block due to pandemic and have traveled or are planning to travel in 2022, you can claim carry-over of 2018-2021 block .
Suppose Kanika could not claim LTA exemption in the block 2018-21 and she traveled twice in 2022. So can she claim one LTA for the carry-over of 2018-21 and one LTA for the block 2022-2025? The answer is no. LTA exemption is available for only one journey in a calendar year. Since he traveled twice in 2022, he should have claimed the highest amount of expenditure as LTA carry-over for 2018-21. She can claim exemption for any journey for block 2022-25 Future,
Nitesh Buddhadev is a Chartered Accountant and the founder of Nimit Consultancy.
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